Bangladesh has signed a long-term agreement to import liquefied natural gas (LNG) from Qatar at the rate of 1.8 million metric tons (MMT) per annum for 15 years. The agreement was signed on Thursday (June 1). According to the agreement, Bangladesh will receive an additional 1.8 MMT of LNG annually, starting in 2026. The long-term LNG sales and purchase agreement (SPA) was signed between Bangladesh Oil, Gas and Minerals Corporation (Petrobangla) and Qatar Energy’s LNG trading arm at Qatar Energy’s headquarters in Doha.
Many countries around the world are struggling with power generation capacity shortages. The world has been plunged into a chronic energy crisis due to the Ukraine war and subsequent Western sanctions on Russia. Rising oil and gas prices and disruptions in supply chains have had major repercussions for emerging economies in the developing world, including all oil and gas importing countries. Bangladesh is heavily dependent on gas and oil for a stable energy supply in the country. The crisis in the power and energy sector is becoming evident. The crisis started last year. Dues from Bangladeshi companies to foreign companies supplying energy products are increasing day by day. This long-term agreement is showing a light of hope when Bangladesh is struggling with the energy crisis.
The Covid-19 global pandemic and the ongoing Ukraine war and its associated syndromes have significantly disrupted gas and oil supplies, which are crucial for power generation in Bangladesh. About 60 per cent of the country’s power plants are powered by gas. According to the Power Development Board of Bangladesh, at least 24 of the country’s 152 power plants currently face gas supply shortages. Gas supply to power plants has fallen to 900mmcf against the demand of around 1,600mmcf. In addition to high prices and gas supply disruptions, the world is witnessing high inflation rates and increasing devaluation of local currencies in many countries against the US dollar. This has created a multidimensional economic crisis in the world that has plagued both developed and developing countries. From the US to Turkey, Germany to Sri Lanka, each country is adjusting to the changing context of food and energy production and supply. Countries like Australia, Indonesia, South Africa and Pakistan have already resorted to load shedding.
The world has been plunged into a chronic energy crisis due to the Ukraine war
The world is facing an energy crisis in this unstable situation of war between Russia and Ukraine. In a bilateral meeting at the Qatar Economic Forum held in Doha, Qatar, the Prime Minister of Bangladesh Sheikh Hasina expressed the desire for closer energy cooperation between the two countries.
Emphasizing the importance of Qatar’s assistance in meeting Bangladesh’s growing energy needs, Prime Minister Sheikh Hasina said, “We want you (Qatar) to help us with energy. In response, Prime Minister Al Thani assured Bangladesh of Qatar’s commitment to all possible assistance. The energy demand is also increasing rapidly. Current power generation capacity stands at 25 thousand 284 MW. The government has set a target of 40,000 MW by 2030 and 60,000 MW by 2041. Electricity coverage has reached 100 per cent across the country. As a relatively clean energy source, LNG is a priority to meet growing energy demand. LNG imports will help fill the national gas grid network set up across the country. Bangladesh will receive more than 3.5 million tons of LNG from Qatar every year. With this new SPA, Qatar Energy reaffirms its position as the LNG supplier of choice for its partners in the South Asian LNG market. Qatar currently supplies more than 3.5 million tons of LNG to Bangladesh annually.
Bangladesh already has a 15-year LNG SPA agreement with Qatar for the supply of 1.8-2.5 MTPA of LNG which was signed on September 25, 2017. From the start of delivery on September 9, 2018, to May 31, 2022, Petrobangla has successfully received 11.746 million metric tons of LNG through 191 LNG cargoes.
In 2017, Bangladesh signed a 15-year agreement to buy fuel from Qatar. That agreement was far-reaching and wise. According to a 15-year deal signed in 2017, Bangladesh now imports about 40 containers of fuel, which translates to 1.8-2.5 MTA. But now Bangladesh wants a larger supply of LNG from Qatar.
The agreement with Qatar will expire in 2032 and with Oman in 2029. Qatar is one of the top energy-producing countries. Bangladesh is currently struggling to meet the growing demand for natural gas due to declining production of natural gas from local gas fields and high prices of LNG in the international market.
Qatar is an oil-rich country in the Middle East. The country is largely dependent on foreign labour to support its economy: 89.5 per cent of Qatar’s residents are foreign nationals. In contrast, Bangladesh is one of the world’s largest labour exporters. About 400,000 Bangladeshi expatriates work there, which is 12.5 per cent of Qatar’s total population. The oil-rich country is undoubtedly an important country for expatriates and migrant workers.
In June 2017, Bangladesh signed an agreement with Qatari company Rasgas to receive 2.5 million tons of LNG annually for the next 15 years. It is important to note that the remittance flow from Qatar has touched US 1 billion in the last five years.
Bangladesh has already pursued Qatar for urgent LNG and extended loans for supplies at relatively low prices. Long-term contracts of LNG will help Bangladesh in energy security by providing an emergency supply.
The writer is a freelance columnist.