DHAKA (REUTERS): South Asia, long a backwater for energy markets, is emerging as a hotspot for liquefied natural gas (LNG), with Pakistan and Bangladesh set to join India as major consumers, helping to ease global oversupply that has dogged this market for years.
Only India and Pakistan currently import LNG in South Asia, taking in a combined 25 million tonnes, or eight per cent of global demand last year.
But with a fast-growing population, strong economic growth and soaring energy demand, more import projects are being developed, led by Pakistan and Bangladesh.
“Both countries already have extensive gas infrastructure due to legacy production from domestic gas fields,” said Chong Zhi Xin, principal Asia LNG analyst at energy consultancy Wood Mackenzie.
“As domestic production has failed to keep up with demand, both markets are a natural fit for LNG imports.” Pakistan only started importing its first LNG in 2015, and surprised some in the industry by developing its first terminal within schedule and budget.
A second is about to become operational and a third is expected to be completed next year.
With Bangladesh set to join the club of importers next year, the region could import 80-100m tonnes a year by the mid 2020s, analysts said, making it the world’s second biggest import region, ahead of Europe.
Last year’s LNG imports by India, Pakistan were 25m tonnes, or 8pc of global demand
Bangladesh, a country of over 160m people, could import as much as 2,500m cubic feet per day (mmcfd) of LNG, equivalent to around 17.5m tonnes per year, by 2025, said Nasrul Hamid, Bangladesh’s state minister for energy and power.
With its own gas reserves depleting and seeking to almost double power capacity to 24,000-megawatt by 2021, Bangladesh is tapping cheap and plentiful supplies on world markets and investing heavily in LNG.
Several floating storage and regasification units (FSRU), the first developed by private US company Excelerate Energy, are due to begin importing cargoes starting in 2018.
“We are working on two FSRUs from which gas will start flowing (by) next July,” Mr Hamid told Reuters.
Both FSRUs will be deployed off Moheshkhali Island in the Bay of Bengal, in the southeast of the country. They will have a combined capacity of 7.5m tonnes a year.
Two more FSRUs are planned, though no exact dates have been finalised. In addition, state-run Petrobangla signed a preliminary deal with India’s Petronet in December to set up an onshore terminal to regasify a further 7.5m tonnes a year of LNG on Kutubdia Island, just to the north of Moheshkhali, at a cost of $950m.
“By 2025, depending on our national demand, we will import anywhere from 2,000 to 2,500mmcfd gas,” Mr Hamid said.
Those imports would add to plans from India and Pakistan to buy 50m and 30m tonnes of LNG per year, respectively, by the mid-2020s.
“LNG imports in South Asia are expected to rise four-fold from 22m tonnes per year in 2016 to over 80m tonnes per year by 2030,” said Mangesh Patankar, head of Asia/Pacific business development at energy consultancy Galway Group.
Should all plans in the region go ahead and Sri Lanka also start imports, this figure could rise to 100m tonnes, industry data shows.
That would push South Asia’s demand ahead of Europe as the world’s second biggest LNG import region by 2020, though it would still lag North Asia’s 150m tonnes of annual imports.
The boom in demand will help ease oversupply in LNG markets, which have resulted in a more than 70pc price fall from their 2014 peaks to $5.75 per million British thermal units.
Mr Hamid said Bangladesh was in talks with Qatar’s RasGas and Indonesia’s Pertamina for long-term deals, while it also planned to import significant amounts of its future demand via the freely traded spot market.
“We are looking for a mixture of both long-term contracts and the spot market,” Mr Hamid said.
Rupantarita Prakritik Gas, part of Petrobangla, in June posted a notice looking for LNG suppliers for spot cargoes from 2018.
Not everyone believes Bangladesh and Pakistan will achieve their LNG ambitions.
“It is likely to be an overly ambitious target… China took more than 10 years to reach 20m tonnes of LNG imports. In India, it took 13 years to reach the same amount,” said Mr Chong.