Govt to ink new Oman deal to secure future gas supply

The future gas availability of the country becomes one step more secure as the government is set to sign its second Sale and Purchase Agreement (SPA) with Oman on 19 June for importing liquefied natural gas (LNG) on a long-term basis after the same was done with Qatar at the beginning of this month.

Under the new agreement, Bangladesh Oil, Gas and Mineral Corporation (Petrobangla) would be able to import an additional 0.5 million to 1.5 million tonnes of LNG from Oman per year from 2026 for the next 15 years.

Importing the additional LNG, however, would completely depend on the country's purchase capacity and gas affordability, both highly impacted now.

At present, Bangladesh bears a burden of around $3 billion to $3.5 billion for importing around 4 million tonnes per annum (mtpa) to 4.5 mtpa of LNG. If the additional gas is imported under the new contracts, annual LNG import payment burden would cross $5 billion, say Petrobangla sources. 

Petrobangla is also going to sign a contract with the Summit Group for building the country's third floating storage and regasification terminal to deal with the newly contracted LNG capacity from 2026.

Summit Group would net around $6.5 million per month from the Build-Own-Operate-Transfer (BOOT) contract scheduled to be signed by next month.

Zanendra Nath Sarker, chairman at Petrobangla, said Oman agreed to supply 0.5mpta to 1.5mpta LNG to Bangladesh from 2026. "It could be like four cargoes in 2026 and then 12 and 16 cargoes in the following years," he said. 

"We have already signed a deal with Qatar and will sign another with Oman, which will boost the gas supply. We will see the result after three years."

Bangladesh has two long-term LNG contracts -- with Qatar for 2.5mtpa of LNG and with Oman's OQ Trading for 1.5mtpa.

The country also has been importing LNG from the spot market since 2020.

Last year, Bangladesh imported a total of around 4.43 million tonnes of LNG from Qatar, Oman and spot market. It was 5.08 million tonnes in 2021.

With the new contracts, the country's long-term import capacity is expected to reach 7.3 million per annum by 2026.

As per the existing deal with Oman, Petrobangla has been purchasing LNG at around 11.9% of the three-month average of Brent crude oil price plus 40 cents per million British thermal unit (MMBtu) of gas.

Petrobangla also has a 15-year SPA, signed in 2016-17, with Qatargas to buy a maximum 2.5 million tonnes of LNG per year.

Under this deal, it pays around 12.65 percent of the three-month average price of Brent crude oil plus 50 cents per MMBtu. Globally, the purchase rate for per MMBtu LNG is fixed based on a certain percentage of Brent crude oil price with an added premium. 

When asked what would be the rate in the new contract with Oman, the Petrobangla chairman declined to comment on this.

At present, the country has a gas demand for 3,500 million cubic feet (mmcf) per day while the supply is 3,000mmcf.

Of the total supply, 750mmcf to 800mmcf comes from LNG imports and the rest from local gas fields.

Petrobangla projected that the daily demand would reach 4,000mmcf by 2026 and contribution from LNG imports would cross 1,500mmcf.           

Experts say these one or two contracts would not be enough to solve the shortfall and these will make the problem even more acute.

Badrul Imam, energy expert and geologist, thinks the government would fall into a more precarious position in the future because of LNG price volatility.

"Within three to four years, there will be a big collapse in the local gas production and more and more LNG will be required to replace dwindling local production, until we discover more gas fields," he said.

He suggested the government extensively focus on local gas exploration.

Data shows the production and supply cost of domestic natural gas is around Tk1.50 per cubic metre while the cost goes up to Tk33 per unit for LNG if it is imported at $9.15 MMBtu from the global market.

Summit to sign contract for 3rd FSRU

The government also looks to increase the capacity to deal with the improved energy supply as it is going to build the third floating storage and regasification unit (FSRU) in Moheshkhali of Cox's Bazar by Summit Group.

This terminal would have a regasification capacity of around 600 million cubic feet per day, Petrobangla sources said.

It is expected to be operational by 2026, Mohd Nurman, Summit's general manager for long-term supply and infrastructure development, told Kpler, the leading provider of intelligence solutions for commodity markets, during the FSRU Asia Summit in Singapore on June 1.

At present, the government has to pay $4,54,000 per day as the capacity charge for the two existing LNG suppliers.