Summit seeks to invest $2.3bn in LNG projects

8 April, 2021 12:00 AM printer

Bangladesh conglomerate Summit Group is bidding for an estimated $2.3 billion of projects to import and store liquefied natural gas on the Indian subcontinent, amid a jump in storage demand from governments seeking to mitigate spikes in gas prices. 

Summit, Japan’s Jera Co. and Mitsubishi Corp. are jointly tendering to build Bangladesh’s first onshore import terminal at Matarbari, along with storage infrastructure, to handle 7.5 million tons of LNG per year, Summit Chairman Muhammed Aziz Khan said in an interview. The results of the tender are expected to be out later this year, he said.

The company has also set its sights on a handful of projects for floating storage regasification units. It is bidding to construct a 7.5 million-tons-a-year FSRU at Payra, Bangladesh, that authorities are expected to award by 2022. It is participating in a tender called by the Ceylon Electricity Board to build a 156,000 cubic-meter FSRU at Kerawalapitiya, Sri Lanka, and is working with Mitsubishi to jointly bid for a project in Pakistan.

At approximately $800 million for an onshore terminal and $500 million for an FSRU, Summit is aiming for a total investment of $2.3 billion in LNG projects, according to Bloomberg calculations based on figures provided by Khan. Khan sees demand for storage increasing as governments face volatility in natural gas prices. North Asian spot LNG prices, known as the Japan-Korea Marker, surged to $32.50 per million British thermal units in January, the highest on record and 500% higher than the same time last year. A burst of frigid winter weather caught the region’s biggest gas consumers flat-footed, causing them to scramble for spot cargoes and sending rates skyrocketing, reports Bloomberg.

Bangladesh and Pakistan’s state-owned energy companies canceled tenders to purchase LNG cargoes amid the spike. That created gas shortages in major cities such as Dhaka and Karachi. The countries’ appetite to improve their energy security by building storage facilities is increasing especially as domestic output from fields drops, said Khan. He estimated that Bangladesh’s domestic output of 2.6 billion cubic feet per day would need to be entirely substituted by imported LNG by 2025 if demand remains at current levels.

The price spike during the winter has “proven that even if it is more expensive than storing oil, you still should store gas because the Japan-Korea benchmark price has been so volatile,” said Khan. “Prices will smoothen out as companies in Japan, Korea and Singapore take initiatives and maintain inventories.”

Meanwhile, the company isn’t planning to build any more oil-fired power plants, although it ran them at full tilt during the winter, said Khan. Instead, it is constructing an additional 1,200 megawatts of gas-fired generation in Bangladesh that will start operating by 2023. Summit Power currently operates 2,000 megawatts of power generation capacity in Bangladesh, of which about 35 percent runs on fuel oil and the rest on natural gas.