How to deal with questionable energy deals and avoid an impending gas crisis

Summary:

• Bangladesh signed a non-binding agreement to import 5M tonnes LNG annually
• LNG imports will double to 2000 mmcfd gas once supplies start
• Current terminals lack capacity; more infrastructure is urgently needed
• Local gas supplies are declining; demand will surpass 5000 mmcfd by 2029

The Bangladesh government yesterday signed a non-binding agreement with American Argent Liquefied Natural Gas (LNG) company to purchase up to 5 million metric tonnes of LNG annually. This is the first major US LNG supply deal since President Donald Trump took office on Monday, according to a Reuters report.

If Argent starts supplying its LNG, Bangladesh's LNG imports would double to around 2000 million cubic feet per day (mmcfd) gas.  

Ashik Chowdhury, executive chairman of the Bangladesh Investment Development Authority, was quoted by Reuters as saying, "This agreement not only ensures a reliable energy supply for Bangladesh's expanding industrial base but also strengthens our strategic partnership with the United States."

The Argent facility is currently under development—meaning that it will take a few years for it to start the supply.

But when it starts giving Bangladesh the LNG, will Bangladesh be ready to take it?

LNG import needs terminals

LNG is imported via ships and it is delivered to a terminal where it is re-gasified and transmitted to the national grid. Currently, Bangladesh operates two Floating Storage and Regasification Units (FSRUs), owned by Excelerate Energy and Summit Corporation, with the capacity to supply around 1,100 million cubic feet daily (mmcfd) of gas.

Both these companies were awarded two more projects by the ousted Awami League government early last year. The current government cancelled both the projects—the last one belonging to Summit—in mid-January.

Both these LNG terminals were scheduled to be launched in late 2026 or early 2027.

On cancelling the Summit deal, Energy Adviser Muhammad Fouzul Kabir Khan told TBS that it was cancelled because the 2010 law under which the letter of intent for this LNG terminal was issued has been repealed.

Bangladesh has built its industries and commercial enterprises on natural gas supplies—which was cheap and easily available till the late nineties. After 2000, production from the massive Bibiyana gas field gave the country a huge boost—prompting industrialisation at a scale the country never saw before. The industrialisation outpaced the gas production—forcing the government to stop giving new gas connections from 2010.

As Petrobangla foresaw the gas production declining, it launched a bid to set up an LNG terminal. After two rounds of open tenders, in late 2014 it secured a deal with American Excelerate and Singaporean Astra under the now-defunct Special Act for quick supply of power and energy. This terminal came into operation in 2018.

Meanwhile the government signed a deal with Summit in 2017 to build another terminal that came into operation in 2019. From that time, Bangladesh has been importing 1100 mmcfd LNG from the Middle East and making up the gas supply deficits. 

 According to Petrobangla, the present demand for gas is 3965 million—while the supply is less than 3000 mmcfd. Of this supply, around 2000 mmcfd comes from the country's gas fields. The remaining is supplied from imported LNG.

The local gas supplies are set to fall below 1915 mmcfd from 2025. Presently the only option to increase local gas supplies is from the Bhola gas fields. The government has initiated a plan to install a pipeline from Bhola island to add 180 mmcfd gas. A part of this pipeline will have to be installed on the river bed—which is a big challenge. Plus, it will take a few years to complete it.

The demand for gas will cross 5000 mmcfd by 2029. That means, by the end of the decade, Bangladesh will need more than 2000 mmcfd imported LNG. To facilitate this extra LNG requirement, the country needs more terminal infrastructures.  

In 2023, the government had signed long term contracts with Qatar's Qatargas and Omani state-owned company OQ Trading Limited for importing an additional about 1.5 million tonnes per annum (MTPA) from 2026. 

All of these show that Bangladesh needs to act fast in order to keep up with its gas demands.

In another news by AFP, the Sri Lankan government has revoked a power purchase agreement (PPA) with Indian Adani for a 484 megawatt Wind Power Project following allegations of graft against Adani in the USA. However it had not cancelled the contract.

The Sri Lanka government has assigned a committee to review the Adani contract—which is alleged to be too pricey compared to other wind power projects (A Reuters report however said that Adani was not aware if the PPA has been cancelled).

Bangladesh also has a deal with Adani power where it sells power from an Indian power plant. The press had reported about how unfavourable this Adani deal is. So far the Adani contract has not been reviewed. For Bangladesh, the Adani power is not even as urgent as LNG terminals.

Bangladesh should review terminal deals

The Sri Lankan move, if true, is the right way to go for Bangladesh. Bangladesh could have started by reviewing the terms and conditions of the terminal deals with Excelerate and Summit. If a government signs a contract with a company, its cancellation by the next government sends investors a wrong signal—unless unfairness is found in those deals.

Investors' confidence aside, Bangladesh needs the LNG terminals for its own good. Therefore, it must be sure that it will be able to set up new terminals within the next two-three years even if the Summit-Excelerate contracts are cancelled.

There are dozens of other power and energy projects that were given on the basis of unsolicited negotiations under the controversial 2010 act. The government cannot cancel these deals as it will lead to an unfathomable chaos. But it can and it should review any of these deals to find unfair terms and conditions and amend them.