WoodMac: Bangladesh’s LNG demand to hit 8 mtpa after 2020

Petrobangla’s deal signed last month with Qatar’s RasGas has marked Bangladesh’s official entrance into the LNG buyers club. 

The 2.5 mtpa, 15-year deal should alleviate some of Bangladesh’s supply shortages but is a far cry from its LNG ambitions, natural resources consultancy WoodMackenzie said, forecasting a more moderate LNG requirement of over 8 mtpa by early next decade.

Current demands have been estimated by the government at over 700 mmcfd, equivalent to around 5 million tons of LNG.

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.

“On the other hand, while gas prices to all sectors have already increased twice in 2017 and averaging at around US$3/mmbtu, it still falls short of international LNG prices, making it attractive for both retail and commercial users. Currently, there is also no firm plan on gas price rationalization,” WoodMac noted.

These factors make the LNG import situation for Bangladesh more pressing.

The state-owned Petrobangla is currently in talks with a number of parties to secure both long term and more flexible options for spot LNG deliveries.

“In June, it signed an MOU with AOT to supply up to 1.75 million tons of LNG. However, the deal is still under discussion and will be a part of its spot procurement strategy,” WoodMac said.

Conversations with key stakeholders indicate the Moheskhali 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 center in Chittagong has also been completed.

Plans are also 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, according to the consultancy.

With plans for another 17 mtpa of planned regas capacity via FSRUs and an onshore LNG terminal, the government is clearly in support to boost its LNG supply. Already, private capital is being attracted to this sector with the involvement of Summit Power, Reliance Power and Petronet who are looking to invest in these terminals, WoodMac said.

The consultancy expects more upside to Bangladesh’s LNG demand particularly if the 1.5 mtpa Indian piped gas import gets delayed or canceled and if its coal-fired power plants do not come online as planned.