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The deal that Bangladesh has recently signed with the Louisiana-based Argent LNG to import liquefied natural gas is set to increase energy risks and unreliability, energy experts have warned.

They believe that the American company will emerge as the main beneficiary of the non-binding deal, using Bangladesh’s reputation as a potential buyer to secure finance needed to launch its business.

On January 24, the Bangladesh Investment Development Authority signed a non-binding deal with the Argent LNG to purchase five million tonnes of LNG annually.

Identifying the Argent LNG project highly uncertain as it, with a deadline of becoming operational by 2030, could not yet start constructing necessary infrastructure, the US-based Institute for Energy Economics and Financial Analysis warned that buying LNG from the USA market would expose Bangladesh to even more external shocks.

‘Argent LNG still has a long way to go in securing binding deals with customers before it can secure financing and proceed to construction,’ said Sam Reynolds, LNG and gas research lead for Asia at the Institute for Energy Economics and Financial Analysis, wrote in an email communication with ¶¶Òõ¾«Æ· over the LNG deal.

Argent LNG is facing serious challenges in securing finance and binding contracts from creditworthy buyers amidst a rush of such projects being implemented worldwide, including in Qatar and the USA, according to the institute.

On its website, the Argent LNG speaks about its ambitious plans to supply fuel to power generation assets across Japan, Southeast Asia, Europe, South America, the Caribbean, the Middle East and North Africa.

The amount of LNG that Bangladesh agreed to import will represent half the capacity that the Argent LNG plans to have at its initial stage. Eventually, the company plans to increase its capacity to 25 Million Tonnes Per Annum (mtpa).

‘The deal is unacceptable, replete with irregularities and flaws,’ said prominent economist Anu Muhammad, also a former member secretary of the National Committee to Protect Oil, Gas, Mineral Resources, Power and Ports.

Bangladesh’s national fuel, gas and minerals company Petrobangla, which signs such power and energy deal, expressed its ignorance after the deal with the American company was signed in Washington by the BIDA.

The interim government had promised that the days of having power and energy deals without tender were over with the ouster of the Sheikh Hasina-led regime amid a student-mass uprising in last July-August. As part of its pledge, the interim government even scrapped the indemnity law allowing deals sans tender.

Energy division secretary and Petrobangla chairman did not answer ¶¶Òõ¾«Æ· calls made for comments. 

BIDA executive chairman Chowdhury Ashik Mahmud Bin Harun on January 26 defended the signing of the deal as the opening step in a process that would complete after many negotiations. 

He said that any future binding agreement would adhere to Bangladesh’s legal framework.

‘The deal signifies the incumbent government’s lack of respect for what people need,’ said Anu Muhammad. 

LNG as a source of energy proved unreliable during the past Awami League regime, which introduced it in 2018, leading to serious economic consequences.

Bangladesh descended into its worst energy crisis, accompanied by a prolonged spell of unprecedented inflation, within years of the start of LNG import that was done through long-term contracts and spot market purchases.

The dollar crisis that hit in 2022 was largely due to import of energy, mainly LNG.

Bangladesh spent Tk 1.73 lakh crore on LNG import until September last year since 2018. The outstanding LNG bill stood at Tk 1,787 crore in September.

Consumers experienced frequent price hikes since the LNG import started with household consumers seeing their energy bill inflate by as high as 35 per cent, hotels and restaurants by 79 per cent and industries by about 200 per cent so far.

Still, Bangladesh was far from witnessing an end to its energy crisis, supplying about 2,700mmcfd in best case scenario against the demand of 4,000mmcfd, about a fourth of which was LNG.

‘Bangladesh actually needed to move away from LNG,’ said Hasan Mehedi, member secretary, Bangladesh Working Group on Ecology and Development, a platform of green activists.

Money was not the only problem, Hasan Mehedi said, infrastructure challenges emerged as important as financial factor in disaster-prone Bangladesh.

Last year, one of the two floating storage and regasification units remained out of operation for six months between January and September after the cyclonic storm Remal hit, said a report of the Institute for Energy Economics and Financial Analysis.

Such incidents recurred since 2018, showed the report, affecting both the regasification units, prompting authorities to cancel LNG cargoes one after another.

Equipment issues also prompted suspension of operations at the units.

‘What is frightening is the government trying to pass the deal as a big one as well as a big strategic move,’ said Hasan Mehedi.

The non-binding deal has no indication of the potential LNG price. The IEEFA, however, predicted that the product would be expensive, given that the cheapest LNG supplier in the world is Qatar.

The US gas market has been rather stable lately but is likely to hike prices in future due to increase in demands, the IEEFA observed.

Bangladesh would also need to spend more on transporting LNG from the Gulf of Mexico, about 15,000km away, double the distance current LNG supplies arrive from.

‘The price that Bangladesh pays for LNG would depend on gas market fundamentals in the United States, leaving the country highly exposed to factors beyond its control,’ said Sam Reynolds.

More viable options could have been signing long-term deals with nearby LNG suppliers given many new LNG projects are under construction, energy experts further observe.

‘Bangladesh stepped into a trap by signing the LNG deal,’ said Hasan Mehedi.

Energy expert Badrul Imam described the deal as a frustrating development.

‘More LNG expense means fewer resources for exploration,’ he said.

‘It does not end the energy crisis, rather threatens to increase it,’ said Badrul.

Having admitted that he was informed before signing of the deal, Energy adviser Muhammad Fouzul Kabir Khan, however, told ¶¶Òõ¾«Æ· that the deal carried very little significance.

Asked about the potential benefits and risks of the deal, he asked the reporter to get the answers from the BIDA, while adding that they found some of the questions too hypothetical to be answered.

‘Can energy prices be predicted five years in advance? The cost of transportation might not always depend on the distance,’ he said.

‘Above all, the company (Argent) does not have any gas in its reserve. There is no question of buying at the moment,’ he added.

From the adviser’s explanation it is apparent that the energy ministry within its legal framework has no option to go ahead with the non-binding agreement as deals can be achieved by three means—open tender, government-to-government and public-private partnerships. While public-private partnership often faces question over the selection of private partner, competition remains the most transparent way of buying the products.