Gas price may rise as LNG import starts next year

Lagging five years behind schedule, the government is finally expecting to import Liquefied Natural Gas (LNG) from Qatar from the end of next year to meet Bangladesh's never-ending gas supply shortfall.

As per yesterday's budget speech, once the country starts importing LNG and begins supplying it to the national grid, the government may have to increase gas prices in the country. That is because the cost of LNG import would depend on the international price.

But with some massive gas price hikes already taken place in two installments this year (the latest one taking place yesterday), the nation may not face any significant gas price hike with the use of LNG.

When the government in 2010 initiated a move to import 500 million cubic feet per day (mmcfd) LNG -- which is a little less than one fifth of the country's present gas demand -- it was very costly at the international market. Back then the price hovered around $15 per mmcfd.

Luckily, the price of LNG has gone down significantly since 2013. It is hovering around $3 to $4 in recent times.

The average gas sales rate in Bangladesh as of yesterday was Tk 221.7 per mmcfd. This price is Tk 20-30 lower than LNG of same quantity. Therefore, the need for price adjustment after LNG import would not be very significant.

Finance Minister AMA Muhith yesterday said, “People are debating the issue of increasing gas prices. Gas will be purchased at international prices when its import begins in 2018. The current rate of taxes levied on gas, therefore, has to be rationalised. Consequently, the unit price of gas will undoubtedly increase. The gas price, however, will be adjusted by following the policy of subsidising.”

Bangladesh currently supplies around 2,700 mmcfd gas from various gas fields across the country. According to Petrobangla, there is a constant shortfall of around 700 to 800 mmcfd.

Given that the demand for gas would continue to increase, the government in 2010 initiated the project to import LNG from Qatar. To receive the liquid gas and convert it to regular gas for local consumption, the nation needed an LNG terminal with relevant facilities at Maheshkhali from where a gas pipeline would transmit the imported energy to the national grid. Initially, it was targeted that the import would be possible from 2012-13.

But the government failed to make any headway with the project till last year. Now a project is being implemented with the target to facilitate the LNG import.

Side by side, the government has signed a contract with local energy company Summit to facilitate import of another 500 mmcfd LNG. There are moves to build two more LNG terminals of similar capacities -- one by a Malaysian venture and another by Indian company Reliance.

“All in all, the government has taken steps for import of 2000 mmcfd LNG,” said a Petrobangla official.

If this volume of gas is imported, that would almost catch up the local gas production.  This means, in future the price of local gas would be greatly influenced by the international LNG price.

But this would be rewarding for the nation, as this will help keep the gas-based power plants, fertilizer factories and private and public industries producing products at a reasonable price. The LNG is environment friendly and its addition would reinforce the country's energy security.