Home ›› 02 Nov 2022 ›› Front
Petrobangla, the state-run oil, gas and mineral resources company, expects to save Tk 38,000 crore in the current fiscal year by suspending Liquefied Natural Gas (LNG) purchase from the spot market, according to officials.
The company has stopped importing spot LNG since last July amid a crunching price hike and depleting foreign reserves. It has yet to resume the purchase even as manufacturers continue to demand for more LNG amid the ongoing energy crisis.
According to Petrobangla officials, per MMBTU LNG costs $32 in the spot market now.
“By stopping spot purchase the country is saving more than Tk 100 crore daily. The government has no plans to buy LNG from the spot market until prices come down,” said Petrobangla Chairman Nazmul Ahsan.
However, the government will still feel the pressure, as it will have to pay a Tk 25,000 crore subsidy to Petrobangla in the current financial year on LNG imports from Qatar and Oman through long-term contracts which are set to expire in 2032 and 2029 respectively.
Petrobangla imports around 4 million tonnes of LNG from the two countries annually. According to the contracts, prices of the LNG are determined with the fluctuation of oil prices in the international market.
Petrobangla officials said currently the government has to spend as much as $15 per MMBTU LNG under the contracts.
Increasing demand, depleting reserve
The government has continued the spot LNG suspension even as the country suffers from a persistent power crisis that is disrupting production across industries.
Manufacturers have been increasingly demanding that spot LNG be imported at high prices with promises to buy it at higher prices, but the government is yet to heed the requests citing a declining foreign reserve.
Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Vice President Mohammad Hatem told The Business Post (TBP) that Bangladesh earned $52 billion in the last fiscal year.
“If the production continues to be disrupted due to lack of gas and electricity then the foreign exchange earnings will decrease. This may further increase the pressure on reserves,” he said.
Officials at RPGCL, a wholly owned subsidiary of Bangladesh’s state-run agency Petrobangla that deals with LNG trading with the suppliers, says LNG import through long-term contracts is not enough to meet the country’s demand.
Mohammad Rafiqul Islam, general manager (LNG) of RPGCL, said, “Previously, the demand was met with purchase from the spot market. But due to the shortage of the foreign reserve, the government has suspended the purchase of spot LNG.”
Purchase from spot market may resume once prices come down, he added.
According to the RPGCL, 29 cargoes of spot LNG were bought in the last two years, with each cargo containing 3.5 million MMBTU gas. LNG bought from the spot market reached the country till 30 September this year under contracts signed before July, according to RPGCL.
Speaking at a discussion on 23 October, Prime Minister’s Energy Adviser Taufiq-e-Ilahi Chowdhury said, “It will take $200 million to buy 200 MMcf of LNG from the spot market every month. If we buy LNG for six months, we will have to spend $1.2 billion.
“We cannot take the risk of importing LNG from the spot market now,” he said citing the deteriorating situation of the reserve.
