August 20, 2018 / 6:18 AM / a month ago

UPDATE 2-Bangladesh starts operations at country's first LNG terminal

* FSRU has started operation after delays - minister

* LNG imports will help offset decline in gas production

* Demand rising in nation where 30 pct have no power (Adds analyst comment)

By Jessica Jaganathan and Ruma Paul

SINGAPORE/DHAKA, Aug 20 (Reuters) - Bangladesh has started operations at the country’s first liquefied natural gas (LNG) terminal, the country’s energy minister said on Monday, following delays related to technical problems and bad weather.

The floating storage and regasification unit (FSRU), which arrived in Bangladesh in April to offload its maiden cargo of LNG from Qatar and moor permanently as an import terminal, began operations on Saturday. It was initially expected to start in May.

The start-up will allow Bangladesh to import LNG to offset falling domestic gas production, feeding industrial demand and power generation in a nation where 30 percent go without electricity. It’s also expected to boost Asian LNG prices, coinciding with an anticipated rise in demand ahead of winter.

“It certainly adds to the factors that point to a very tight market this winter,” said Nicholas Browne, senior gas analyst at energy consultancy Wood Mackenzie. “This is mainly driven by limited additional supply until late 2018 together with strong expected demand from China and South Korea.”

Since its arrival at Moheshkhali, near Cox’s Bazar in southeast Bangladesh, in April, bad weather has hampered the FSRU’s efforts to dock properly, connect to the import infrastructure and offload its first cargo of Qatari LNG, officials have said.

The FSRU initially started operations last week but had to call a halt due to a leak in an onshore facility, a source told Reuters.

“We have started the process of feeding the gas to the grid,” Nasrul Hamid, Bangladesh’s state minister for energy and power told Reuters on Monday.

“This is a first step and we are taking more initiatives to meet growing consumption needs and feed the expanding economy.”

The Excellence FSRU is operated by privately owned U.S. company Excelerate which had declared force majeure on the project due to the delays. Declaring force majeure absolves a company from responsibility for delays to fulfilling contracts due to circumstances beyond its control.

Asked about the force majeure, an official at state-owned national oil company Petrobangla said “everything will be resolved as per the agreement”.

The country of 165 million people relies on its gas resources for 70 percent of energy production but as demand has risen its falling supply has struggled to keep up, prompting it to consider a host of LNG projects.

The country’s second FSRU is expected to be ready by March, next year.

That will help to ramp up LNG imports to 2.9 million tonnes in 2019 from the 0.6 million tonnes expected this year, said WoodMac’s Browne. By 2020, imports could reach 4.6 million tonnes, he said. (Reporting by Jessica Jaganathan in SINGAPORE and Ruma Paul in DHAKA; Editing by Richard Pullin)

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