Summit LNG shutdown pushes Bangladesh gas supply to a 16-year low

The shutdown exposes Bangladesh’s growing dependence on imported LNG as ageing domestic gas fields decline, while terminal disruptions and cargo problems strain supplies to industry and other sectors.

Bangladesh’s gas crisis has deepened after Summit’s liquefied natural gas terminal in Maheshkhali stopped supplying the national grid completely on Thursday, sending daily gas availability down to about 1.9 billion cubic feet, against demand of around 3.8 billion cubic feet.

The terminal halted supply at 5 pm because of adverse weather conditions. Summit had continued supplying reduced volumes from its existing LNG stocks after being unable to connect a new LNG cargo to the terminal. The remaining stock eventually reached a critical level, forcing the company to stop supply altogether.

The latest disruption has pushed Bangladesh’s gas supply to its lowest level in 16 years. Domestic gas production, which stood at 1.744 billion cubic feet per day in 2009, rose to about 2.7 billion cubic feet in 2018 from local sources alone. But a lack of expected progress in new gas exploration and declining output from older wells have since reduced domestic production to between 1.6 billion and 1.7 billion cubic feet a day.

The decline in domestic production has increased Bangladesh’s dependence on imported LNG. The shutdown of Summit’s terminal has now intensified pressure on the national gas network.

Two floating storage and regasification units, or FSRUs, operate in Maheshkhali to receive LNG. Excelerate Energy’s terminal has a capacity of 600 million cubic feet a day, while Summit’s can handle 500 million cubic feet.

Excelerate’s terminal was shut down after a fire on July 21, leaving Summit responsible for a large share of LNG supplies to the national grid.

Summit subsequently supplied as much as 560 million cubic feet of gas a day before keeping deliveries at around 500 million cubic feet. On Monday, however, an LNG cargo reached the Bay of Bengal but could not be connected to Summit’s terminal because of rough seas. The company therefore had to rely on its existing stocks to maintain supplies temporarily.

Summit began reducing deliveries on Monday evening to slow the depletion of its reserves. Supply was cut to 200 million cubic feet on Tuesday and then held at just 100 million cubic feet from Wednesday until Thursday afternoon. The flow stopped completely at 5 pm on Thursday.

Excelerate’s FSRU has been operating partially since August 6 and is currently supplying 300 million cubic feet of gas a day.

Cargo issues have added to the disruption. An LNG cargo named Al Hamra, supplied by Saudi Aramco, has not been accepted by either of the Maheshkhali terminals because of an insurance-related objection concerning the cargo, which was supplied through ADNOC.

Mohammad Abdul Mannan, acting chairman of Petrobangla, said Saudi Aramco had been asked to replace the cargo.

Power generation has been given priority as overall gas supplies have fallen, putting further pressure on industry. Power plants previously received 680 million cubic feet of gas a day but are now being allocated about 1 billion cubic feet. Fertiliser production is receiving 140 million cubic feet, leaving only 850 million cubic feet for industry, households and other sectors.

Three weeks ago, those sectors were receiving between 1.6 billion and 1.65 billion cubic feet a day.

The allocation priority for electricity has helped efforts to keep power generation running but has worsened the gas shortage facing industry. Falling gas pressure at production-dependent industrial facilities has raised concerns that output could be disrupted.

Bangladesh first began adding 300 million to 500 million cubic feet of imported LNG a day to the national supply in 2018 to address the shortfall. Petrobangla now imports an average of about 1 billion cubic feet of LNG a day in an effort to keep total gas supplies at around 2.7 billion cubic feet.

But adverse weather at sea, complications in unloading cargoes and technical problems at LNG terminals have repeatedly disrupted supplies.

As domestic gas production declines and imported LNG supplies remain uncertain, the country’s gas shortage is worsening on both fronts. Without long-term exploration and new gas sources, the impact on industry and commercial activity could increase further.

Power, Energy and Mineral Resources Minister Iqbal Hasan Mahmud Tuku said the government currently had no option but to manage the situation until conditions at the LNG terminals returned to normal. He also said it was not possible to suddenly increase gas extraction during a crisis.

A Petrobangla director said preparations could begin on Friday night to connect the cargo to the terminal if sea conditions improve. If conditions remain favourable, LNG could be taken from the cargo early Saturday morning and Summit could resume supplying the national grid after noon.

A rapid resolution to the wider crisis, however, appears unlikely. Before Excelerate’s fire-damaged terminal can return to full capacity, it will require 72 hours of testing. Gas supplies from the terminal will also have to remain suspended during that period.

As a result, even if Summit resumes deliveries, it could take several more days for Bangladesh’s overall gas situation to return to normal.