Thursday, 03 August 2017

Private capital eyes Bangladeshi LNG-to power projects

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Private capital eyes Bangladeshi LNG-to power projects

Plans for another FRSU with 17 mtpa regas capacity and an onshore LNG terminal show the government of Bangladesh “is clearly in support to boost its LNG supply,” Wood Mackenzie comments. Already, private capital is being attracted to this sector with Summit Power, Reliance Power and Petronet looking to invest in these terminals.

Wood Mackenzie say is expects “more upside to Bangladesh's LNG demand particularly if the 1.5 mtpa Indian piped gas import gets delayed or cancelled, and if its coal-fired power plants do not come online as planned.”

Plans are under way to build a subsea pipeline from Moheskhali Island to the mainland gas valve. A US$180 million financing package with Excelerate for the Moheskhali FSRU has also been concluded.

Demand seen rise to 8 mtpa

PetroBangla, Bangladesh's state-owned oil company, signed its first LNG import deal for 2.5 mtpa over 15 years with Qatar's RasGas in July – entering into the LNG buyers' club. Still, Wood Mackenzie says this deal “is a far cry from its LNG ambitions.”

Although the contacted import volumes should alleviate some of Bangladesh's current supply shortages, the consultancy forecasts requirements will rise to over 8 mtpa by early next decade.

The Bangladeshi government pegs the country’s LNG demand at over 700 mcf/d, equaling around 5 million tonnes. However, due to the lack of domestic gas production, the government has stopped building gas pipelines and has been promoting the use of LPG in residential and commercial areas over the past few years.

Price discrepancy

The stark discrepancy between domestic, regulated gas prices and spot market prices for LNG in Asia is another issue: The gas price for all industry sectors in Bangladesh have already increased twice in 2017 and now averages US$3/mbtu, but it still falls short of international LNG prices.

This price spread makes gas “attractive for both retail and commercial users” in Bangladesh, according to WoodMac analysis. “Currently, there is also no firm plan on gas price rationalisation. “

“These factors make the LNG import situation for Bangladesh more pressing,” analysts warned.

Spot LNG deliveries

PetroBangla is in talks with various parties for both long term and more flexible options for spot LNG deliveries. In June, it signed a Memorandum of Understanding (MoU) with AOT to supply up to 1.75 million tonnes of LNG.

The deal is, however, still under discussion and will be a part of its spot procurement strategy.

Conversations with key stakeholders indicate the Moheskhali Floating Storage and Regasification Unit (FSRU), which will support its first LNG imports, remains on schedule to begin by the end of 2018. The onshore gas pipeline connecting the FSRU from Cox's Bazar to the main demand centre in Chittagong has also been completed.

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