LNG import: Foreign companies seek long-term deals, but experts want competitive bidding

International suppliers are offering long-term deals with Bangladesh to meet its soaring demand for liquefied natural gas (LNG), while energy experts and consumer right groups want the government to go through a competitive bidding process to ensure transparency.

Currently, the government is importing around five to six LNG cargoes, having the quantity of around 138,000 cubic metres every month.  But the forecast is that the import will go up gradually as the country's focus is now being shifted to LNG from coal as primary fuel for power generation.

According to sources, Bangladesh now imports LNG from two companies—Qatar-based QatarGas and Oman-based Oman Trading International—on long term basis while short-term supply is coming from international spot market where 17 more companies are enlisted.

Four more companies have been given green signal to be enlisted with the state-owned Petrbangla to supply LNG from the spot market.

Official sources said the long-term import is based on unsolicited deal while the short-term imports are taking place through a bidding process.    

A senior official at the Energy and Mineral Resources Division said Excelerate Energy of USA, local Summit Group, Dubai's ENOC, AOT of Switzerland, Vitol Asia are among the foreign companies which have recently expressed their interest to supply LNG on long-term basis besides their short-term supply.

He said all these companies are now involved in supply of LNG from spot market on short-term basis.

Meanwhile, consumer rights groups and energy experts have underlined ensuring transparency and accountability to select new suppliers of expensive LNG as the government has moved to select several long-term LNG suppliers to meet the country's growing natural gas demand.

The government should select long-term LNG suppliers following an open and competitive mechanism, energy adviser of the Consumers Association of Bangladesh (CAB) professor M Shamsul Alam said.

If the government selects the suppliers arbitrarily the purchase price of expensive LNG will be even costlier, he said.

The CAB adviser also demanded immediate cancellation of the Speedy Supply of Power and Energy (Special Provision) Act 2010 to ensure transparency and accountability in the country's power and energy sector.

The law was enacted more than a decade back to manage an emergency crisis in power and energy sector. "But now, that emergency crisis is over and the law has no relativity", he added.

The government subsidy in energy sector will also mount further as the consequences of any farther unsolicited deals, he warned.

On the issue of ensuring transparency in LNG import, eminent energy expert Professor M Tamim said the government should avoid the path of selecting long term LNG suppliers through unsolicited mechanism for the sake of ensuring its 'anti-corruption' image.

"The government can select the suppliers either through competitive open tender process by setting some criteria or through pursuing 'Swiss Challenge' mechanism", he said.

A Swiss challenge is a form of public procurement operated in some jurisdictions, which requires a public authority, which has received an unsolicited bid for a public project or for services to be provided to government, to publish the bid and invite third parties to match or better it.

Official sources said Petrobangla inked LNG sales and purchase agreements (SPAs) with the two companies after G2G negotiation under which it started regular import of LNG from September 9, 2018.

The country's first-ever sales and purchase agreement with Qatar's RasGas was signed to buy annually around 2.5 million tonnes per year (Mtpa) of lean LNG over 15 years.

During the initial five years of the deal, QatarGas will supply annually around 1.8 Mtpa of LNG, which will be increased up to 2.5 Mtpa in next 10 years.

The purchase price has been set at around 12.65 per cent of the three-month average price of Brent crude oil plus US$ 0.50 constant per MMBtu (million British thermal unit).

If Petrobangla has more demand during the first five years, it can increase the LNG import volume annually to 2.5 Mtpa, and during the next 10 years Petrobangla has the option to reduce the amount by 10 per cent every year.

On the other hand, the entity signed almost a similar deal with Oman trade International to import the bulk LNG.