LNG import cost set to skyrocket in two years

Bangladesh's struggle to foot liquefied natural gas (LNG) import bills is set to skyrocket in two years, as the country allegedly signed purchase deals at higher costs than the contemporary market rates.
Officials said state-run Petrobangla inked four long-term LNG import deals in only a one-year period, from June 2023 to June 2024, to meet the demands until 2041.
The latest such agreement involving higher costs was signed with Summit Oil & Shipping Company Ltd (SOSCL) in June 2024, maintaining 'top confidentiality', only a couple of months before the fall of Sheikh Hasina's government, said a senior Petrobangla official.
Along with a 1.5 million tonne per annum (MTPA) LNG supply deal, the local energy giant was also awarded a deal to build a 4.5 MTPA-capacity floating storage and regasification unit (FSRU), he said, at a time when the company's existing FSRU was struggling to resume operation following an accident in late May.

Unlike the previous occasions, this time no formal deal-signing ceremony was held, said the official, adding that Summit would supply LNG as a trading company after sourcing it from the producers.
The Petrobangla officials allegedly were not also willing to disclose the details of the deals.
With these four new ones, the total long-term LNG import deals reached six.
The country's overall LNG import volume will increase to around 9.50 MTPA after 2026 from existing around 3.0 MTPA.
Petrobangla is already struggling to clear dues of LNG suppliers and the overdue payment soared to around US$500 million until August 31, said a senior official at the Ministry of Power, Energy and Mineral Resources (MPEMR).
All these long-term deals were signed under the controversial Quick Enhancement of Electricity and Energy Supply (Special Provision) Act 2010 (Amended 2021), bypassing competitive tender and only through negotiations with the parties concerned, a senior official at the Energy and Mineral Resources Division (EMRD) told the FE Saturday.
He said that there were no pre-set criteria to initiate negotiations with the LNG suppliers as the government is yet to fix any qualifications of the suppliers.
No feasibility study or market analysis was also carried out before signing these agreements having liabilities to pay a substantial amount of foreign currencies to the suppliers, the official added.
Before the Summit, another LNG trader Excelerate Energy also bagged a Petrobangla deal to supply LNG to Bangladesh after sourcing the fuel from suppliers' due to absence in any qualification criteria, the official added.
The agreed price of LNG under the new supply contracts is 13-13.5 per cent of three-month average Brent crude price plus 0.40-0.50 US cents constant per million British Thermal unit (MMBTu), they said.
But the world's long-term LNG deals  were then hovering between 11 per cent and 12.7 per cent of three-month average Brent crude price and no constant price were tagged with the deals, traders said.
It means if the Brent crude price hovers around US$100 per barrel, Bangladesh will have to import LNG from the new suppliers at the cost of around US$13.40-14 per MMBTu, while many other LNG buyers from across the world will buy it at around US$11-12.7 per MMBTu, they said.
Bangladesh's LNG purchasing costs after two years would be 10-15 per cent higher than the price it has been purchasing from the two long-term LNG suppliers - Qatargas and OQ Trading, they added.
During a May 2024 deal, Arcelor Mittal Nippon Steel India has signed a deal with Shell Global for the supply of only 500,000 tonne per year (tpy) of LNG, starting from 2027 for 10 years, at only 11.5 per cent of three-month average Brent crude price, according to data of S&P Global Commodity Insights, a global company that benchmarks LNG prices globally.
Shell's LNG long-term agreement with Turkey's Botas for 4 billion cubic metre per day has been priced on a hybrid formula, with the crude oil-linked price range from just below 11-11.2 per cent against crude oil benchmark, market sources said.
India's GAIL and Vitol Asia entered into a long term LNG supply deal pricing at around 12.40-12.45 per cent of three-month average Brent crude price during a January 2024 deal, the data revealed.
Abu Dhabi National Oil Co. (ADNOC) LNG and ENN LNG (Singapore) Pte. Ltd. entered into non-binding deal to supply 1.0 MTPA of LNG for 15 years at around 12.6 per cent slope to crude oil benchmark during December 2023.
ADNOC Gas in August 2024 recently signed preliminary LNG off-take agreements for its Ruwais LNG project, with Shell, Mitsui and Osaka Gas, at a price of around 12.6 per cent slope to crude oil, the data stated.
According to the sales and purchase agreement (SPA) between Petrobangla and the SOSCL, Petrobangla will buy 1.50 MTPA of LNG for 15 years from 2026 and onwards at around 13.50 per cent of the three-month average Brent crude oil prices plus 0.40 US cents per MMBTu, said sources.
Petrobangla inked SPA with Excelerate Energy in November, 2023 to buy up to 1.0 MTPA for 15 years from January 2026 at the price around 13.35 per cent of the three-month average Brent crude oil prices plus 0.30 US cents per MMBTu,
Previously in June 2023, Petrobangla inked an SPA with QatarEnergy for purchasing up to 1.8 million MTPA of LNG for 15 years starting in January 2026 at the price above 13 per cent of the three-month average Brent crude oil prices.
Petrobangla also inked an SPA with OQ Trading, formerly known as Oman Trading International, in June 2023 to import up to 1.5 MTPA of LNG for 10 years starting in 2026 at the price above 13 per cent of the three-month average Brent crude oil prices.
Bangladesh is currently buying LNG from Qatargas at 12.65 per cent of three-month average Brent crude price plus 0.40 US cents constant per MMBTu, from OQ Trading at 11.90 per cent of three-month average Brent crude price plus 0.50 US cents constant per MMBTu, said officials.
Bangladesh's new interim government, however, intends to review all projects, including that of the Summit's FSRU.
A five-member committee, headed by retired Judge of High Court Division Moinul Islam Chowdhury, has already been constituted to review the deals inked under the special law.
Energy expert Professor M Tamim stressed the need for annulling all deals under the special law that goes against the country's interest.
Energy Adviser of the Consumers Association of Bangladesh (CAB) Dr Shamsul Alam also emphasised on immediate cancellation of the special law along with the deals inked under it.
He also sought punishment to all those involved with signing the deals under the special law.
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