OQ Trading Seeks Spot-Linked LNG Price as Bangladesh Pushes for Contract Supply
Bdbusinessdaily.com – Long term LNG supplier OQT seeks a spot-market-linked price to resume full LNG deliveries to Bangladesh, while the state buyer insists that the existing oil-linked formulas under two long-term agreements must remain in force.
OQ Trading Limited, the Omani state-owned supplier, has proposed pricing LNG against the Japan-Korea Marker (JKM), a key Asian spot-market benchmark, minus $0.04 per million British thermal units (MMBtu). Rupantarita Prakritik Gas Company Limited (RPGCL) has rejected the proposal, saying the agreed terms of the supply purchase agreements should be honoured.
The disagreement has become more significant as delivery disruptions linked to the US-Iran conflict and the closure of the Strait of Hormuz have increased Bangladesh’s reliance on volatile spot-market LNG purchases.
Spot Formula Would Raise Bangladesh’s LNG Cost
Based on the JKM price of $26.275 per MMBtu on 14 October, OQ Trading’s proposed formula would put the LNG price at $26.235 per MMBtu.
That is substantially higher than the cost under Bangladesh’s current long-term contracts. With Brent crude at $106.66 per barrel on the same date, the first agreement would price LNG at about $13.20 per MMBtu, while the second would price it at roughly $14.69 per MMBtu.
The proposed spot-linked rate is therefore about 99% higher than the price under the first agreement and around 79% higher than the second. Bangladesh relies on long-term contracts to reduce exposure to sharp spot-market movements during periods of supply disruption.
RPGCL Seeks Confirmation of 32 Cargoes for 2027
In a letter dated 9 October to OQ Trading Chief Executive Officer Wail Al Jamali, RPGCL asked for confirmation that all 32 LNG cargoes scheduled for 2027 would be delivered by 15 October. Bangladesh needs that confirmation to prepare its annual LNG delivery plan.
The country expects 16 cargoes under each contract. OQ Trading signed its first long-term LNG agreement with Bangladesh on 6 May 2018 and its second on 19 June 2023. Each deal covers 51 million MMBtu annually, equivalent to 16 cargoes.
Under the first contract, the LNG price is set at 12% of Brent crude plus $0.40 per MMBtu. The second agreement uses a formula of 13.3% of Brent plus $0.50 per MMBtu.
On 14 October, OQ Trading provided a delivery programme for 16 cargoes in 2027—half the volume Bangladesh expects under both agreements. The supplier proposed loading all of those cargoes from Ras Laffan port.
The plan OQT sent us seems not convincing. We sent a letter seeking clarity and certainty of delivery. If delivery from the Ras Laffan port is not secured, there is no point in sending a delivery plan.
Bangladesh Cites Contractual Delivery Duties
RPGCL says the agreements require OQ Trading to deliver the contracted quantities even if cargoes need to be sourced outside Oman. In its letter, the buyer referred to Article 5.1 of the supply purchase agreements and urged the supplier to meet its obligations.
RPGCL also asked OQ Trading to consider sourcing LNG from countries including Algeria, Nigeria, Equatorial Guinea, Egypt, France, Belgium, the United States, Angola and the Netherlands. It noted that OQ Trading had sourced cargoes from outside Oman in 2019, 2020 and 2021.
Long term LNG supplier OQT seeks a different pricing structure, but Bangladesh’s position is that a change in loading location can be accommodated without changing the agreed price formula or annual contract quantity.
The buyer expects that notice to confirm the full base annual contract quantity under each SPA and to identify the loading port for any cargo to be supplied from a source other than Qalhat.
FAQ: Bangladesh and OQ Trading LNG Supply
Why is Bangladesh opposing the proposed JKM-linked LNG price? Bangladesh says its two long-term agreements already contain oil-linked pricing formulas. At the market levels cited, the proposed JKM-based price would be significantly more expensive.
How many OQ Trading LNG cargoes does Bangladesh expect in 2027? RPGCL expects 32 cargoes in total: 16 under each long-term LNG agreement.
Can OQ Trading source LNG outside Oman? RPGCL maintains that cargoes may be sourced from other locations if contractual conditions are met and the supplier identifies the relevant loading port.
