Bangladesh is set to pay sharply higher prices to secure two liquefied natural gas (LNG) cargoes from the volatile spot market amid supply uncertainty linked to tensions between Iran and Israel.
The government approved the purchases at its first meeting of the Cabinet Committee on Public Purchase under the BNP-led administration on Wednesday night.
“We have received approval from the cabinet committee to procure one LNG cargo from Gunvor Group at $28.28 per MMBtu and another from Vitol at $23.08 per MMBtu,” said Md Erfanul Haque, chairman of Petrobangla.
He said the Gunvor cargo will cost around Tk 12680 crore, compared with about Tk 500 crore for a similar shipment in January this year, underscoring the surge in global LNG prices.
According to officials, the Gunvor cargo is expected to arrive in Bangladesh on 15–16 March, while the Vitol shipment is scheduled for 18–19 March.
Another official said the government was forced to turn to the spot market after QatarEnergy temporarily suspended LNG deliveries and invoked force majeure linked to the Iran–Israel conflict.
Long-term LNG contracts
Bangladesh currently imports LNG from Qatar under two long-term agreements.
Under the first contract, signed in 2017 with Qatargas, Bangladesh imports 1.8–2.5 million tonnes per annum (mtpa) of LNG. The 15-year deal is priced at 12.65% of Brent crude plus $0.50.
A second long-term agreement was signed in 2023 with QatarEnergy for 1.5 mtpa of LNG, with deliveries beginning this year at a price of 13.25% of Brent crude.
However, disruptions linked to the Iran–Israel tensions have forced Bangladesh to procure LNG from the spot market at significantly higher prices.
The geopolitical tensions have also pushed global oil prices above $82 per barrel.
Gas rationing measures
Petrobangla began rationing gas supplies from Wednesday as the country faces mounting energy shortages and uncertainty over LNG imports.
The measures include reducing gas supply to power plants by 50 million cubic feet per day (mmcfd) and temporarily shutting down most fertiliser factories, except the Shahjalal Fertiliser Company Ltd plant. Officials say closing the factories will save around 130 mmcfd of natural gas.
Bangladesh has also decided to curb electricity generation in response to the gas shortfall.
Tender difficulties
Officials said a tender issued on 3 March to purchase LNG from the spot market attracted no bidders. A fresh tender floated on 4 March also received no responses. Petrobangla later secured the two cargoes through direct negotiations from spot market.
Four LNG cargoes scheduled for March have already crossed the Strait of Hormuz, a critical global shipping route, but authorities remain concerned about two additional shipments expected on 15 and 18 March.
Bangladesh has written to QatarEnergy seeking clarification on the deliveries. In its initial response, the company indicated that emergency clauses in the contract could apply, potentially limiting Bangladesh’s ability to arrange alternative supplies.
As a precaution, the government has decided to cut daily gas supply by 200 million cubic feet, which officials estimate will save around 1.4 billion cubic feet over the next seven days.
Officials said four LNG cargoes due to arrive on 3, 5, 9 and 11 March have already passed through the Strait of Hormuz and should be sufficient to maintain supply for 12 to 15 days.
Bangladesh plans to import nine LNG cargoes in March, including six from Qatar and two from Australia. Petrobangla expects to import 11 cargoes in April and another 11 in May, with 19 shipments in total expected to pass through the Strait of Hormuz.
Each LNG cargo typically contains around 3 billion cubic feet of gas, slightly below Bangladesh’s daily demand. Domestic gas fields currently supply about 1.7 billion cubic feet per day, supplemented by 800 million to 1 billion cubic feet of imported LNG.
The country’s two floating LNG terminals at Maheshkhali Island have a combined regasification capacity of around 1.1 billion cubic feet per day.