Bangladesh Receives First Imported LNG from Qatar
Excelerate Energy's floating storage and regasification unit (FSRU) Excellence arrived at Bangladesh's Moheshkhali Port on April 23 bringing with it a commissioning cargo from Qatar.
The $180 million project was co-developed by Petrobangla, Excelerate Energy and the International Finance Corporation, a member of the World Bank Group.
“Bangladesh suffers from two crippling energy shortages: electricity and gas,” says Wood Mackenzie's director of gas and LNG research Nicholas Browne. “Grid based power shortages result in load shedding and expensive diesel generation. Meanwhile, residential, CNG, industrial and power users all struggle to access as much gas as required, while domestic gas has already started to decline. Pipeline pressure is frequently very low.
“Combined, these gas and power shortages impact economic growth. The introduction of LNG into the fuel mix is a critical step in overcoming these challenges. As Bangladesh has a non-investment grade credit rating, international financing agency support was crucial to enable the project to go ahead.”
The FSRU has an annual capacity of 3.8mt. Excelerate Energy will operate the terminal for 15 years receiving a fee of $90 million per year. After this, ownership will transfer to Petrobangla. An onshore gas pipeline connects the FSRU to the main demand center in Chittagong, the second largest city in Bangladesh. There, it will supply existing power plants currently running short of gas.
QatarGas will supply 1.8 mmtpa of LNG between 2018 and 2022 and 2.5 mmtpa of LNG between 2023 and 2032. “FSRUs, new LNG markets and Qatari LNG seem to go hand in hand,” says Browne. “Qatar also supplied the first cargoes via FSRU to Jordan and Pakistan.”
This is the first step of a significant ramp up of LNG in Bangladesh, he says. The country's second terminal is expected to start up in 2019. It is also a 3.8 mmtpa Excelerate FSRU which will be located at Moheshkhali.
Beyond this several other projects and LNG contracts are gaining momentum. In December 2017, financing was approved for a terminal and a 750 MW power plant by Reliance Energy. In January 2018, Bangladesh Power Development Board signed an MoU With Pertamina to develop 1.4 GW of new gas-fired capacity, together with a dedicated FSRU and related LNG supply. Then in March 2018, Summit Power, Mitsubishi and Diamond Gas agreed an MoU to construct a terminal and 2.4 GW of power capacity. Meanwhile PetroBangla has agreed several supply MoUs, including with AOT, Gunvor, Oman LNG and Pertamina.
“The longer-term fundamentals for LNG in Bangladesh look sound,” says Browne. “Domestic gas production is expected to decline by over 25 percent by 2025. As such we expect LNG demand to rise to 11mt by 2025, and there is still market available to suppliers. Key risks to LNG demand will come from concerns around the affordability of an increasingly LNG based power sector. This may lead the government to renew its push to build more coal capacity.”