Vitol’s trades cause LNG prices soaring, BD affected

World’s major energy commodity trader Vitol’s three recent trades for liquefied natural gas-LNG cargoes have, alongside the international market, directly impacted on the LNG purchase of Bangladesh as two major supplies, scheduled for November and December, have been cancelled over high prices.

The prices, at which Vitol bought the commodity between Friday and Tuesday last week, varied from $6.62 per mmBtu for the first cargo to $6.87 per mmBtu for the third one. And following these trades, the Japan-Korea Marker benchmark surged 20 percent to $6.761 per mmBtu—the year’s high. 

Meanwhile, Bangladesh has cancelled the second tender in a row to import LNG in December, as it received one offer to supply the shipments that were too expensive. In the offer from Vitol to supply 138,000 cubic metres of LNG for Dec. 9-10 delivery was more than $2 per unit higher than the prices that Bangladesh pays under long-term contracts. Earlier the state-run Rupantarita Prakritik Gas Company-RPGCL, which is in charge of LNG imports into the country, cancelled a tender for November delivery, citing the same reason.

Anisur Rahman, senior secretary to the Energy and Mineral Resources Division was being quoted in the reports published by national and international media in this connection.
Terming this as an unusual situation, experts in energy sector said, the price hike has a direct connection with the three trades executed by commodity trading major Vitol last week. 

The trades included one purchase of an LNG cargo from PetroChina, one from Gunvor, and one from Trafigura.
 
This trading has made the company the talk of the LNG town, writes Irina Slav, a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. 
The price hike might cause bigger crisis in the upcoming days mainly from weather forecasts expecting a cold winter in the northern hemisphere and specifically in Asia. 
Global LNG demand will jump by 4 billion cubic meter this winter, to be led, unsurprisingly, by a pickup in consumption in China, Japan, and South Asia, Irina wrote citing the analysts from Refinitiv, a global provider of financial market data and infrastructure.

Bangladesh prefers purchasing LNG from spot market as it costs lesser than that of long-term deals. And the country has already received one supply from Vitol that went in favour of the country’s position. 

According the reports, RPGCL bought first spot LNG cargo ever from the Asian unit of Vitol at $3.8321 per mmBtu for delivery over late September to early October. This saved over 3 crore BDT as under its long-term deals with Oman Trading International and Qatar gas, Bangladesh pays about $5.50 to $6 per million British thermal units (mmBtu).
Presently Bangladesh is considering to issue new tender for LNG purchase in December. But , prices for spot cargoes, or shipments typically for December delivery, are gaining on robust buying appetite ahead of a colder-than-expected winter. 

Spot LNG prices for Asia were estimated at $6.90 mmBtu on Friday, their highest in more than 20 months, a report by Business Recorder says.

Bangladesh initiated LNG imports from the spot market in late September to take advantage of low prices and meet growing domestic demand as well as to diversify LNG sourcing beyond term contracts, RPGCL managing director Mohammad Kamruzzaman previously told media.

Vitol Asia delivered the first and the only spot LNG cargo so far on September 25. The re-gasified LNG was fed into the national gas grid and Bangladesh expected to save around Taka 300 million ($3.52 million) by diversifying into the spot market. Vitol had offered the best bid at $3.8321/MMBtu for the first LNG cargo out of a total of four bids.
The 14 suppliers allowed to bid for Bangladesh's spot tenders are: Mitsui, Marubeni, Osaka Gas, Jera, Cheniere Marketing International, Vitol Asia, Trafigura, Diamond Gas International, Excelerate Energy, Woodside Petroleum, Eni, AOT Trading, Petronas, and the joint venture of Summit Corp and Summit Oil & Shipping of Bangladesh.

Currently, the country's LNG import price under long-term contracts with Qatargas and Oman Trading International, ranges around $5.50-$6.00/MMBtu, an RPGCL official said.
Bangladesh has a 15-year contract with Qatargas to import around 2.5 million mt/year of LNG, at a 12.65% slope of the three-month average Brent price plus a 50-cent constant. Its contract with OTI is for 10 years at an 11.9% Brent slope plus 40 cents.

Bangladesh has two operational floating, storage regasification units with a capacity of around 500 MMcf/day equivalent in LNG.