MIGA offers mega-financing plan for LNG import

A new avenue for Bangladesh in LNG supply is about to open up as World Bank Group's outfit MIGA has made financing proposal to facilitate the energy import from overseas market to feed its growing fuel demand, sources said Saturday.

Following the proposal placed by the Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group, the Energy and Mineral Resources Division (EMRD) of the government is scrutinizing the proposed financing package, Division officials said.

The MIGA recently placed the proposal to the interim government the  plan with guarantee for trade financing, especially for opening letters of credit (LCs) with local or foreign commercial banks.

A senior EMRD official says the MIGA has proposed to help Bangladesh in importing liquefied natural gas or LNG worth up to US$350 million annually from the international market. It also offers that the facility will be enhanced over the next seven years.

The proposed $350 million worth of credits for the first year will be a "revolving LC facility" for securing Petrobangla's long-term working capital aimed at importing the LNG smoothly.

"However, we have sought more than US$500 million worth of financial support from the MIGA at this moment on concessional terms," he adds.

"We are comparing the proposal with other financing facilities like the ongoing credit facility from the Islamic Development  Bank (IsDB)'s ITFC. If we find it concessional than the other existing facilities, we will go for borrowing the loan," the EMRD official told The Financial Express.

The ITFC has recently confirmed $600 million worth of loans for Bangladesh to import fuels and fertilizers from the overseas market.

Bangladesh government will borrow $600 million from ITFC to import fuel oils, LNG, and fertilisers. The loan will carry an interest rate of six-month SOFR -plus 1.80 per cent, along with a 0.2-percent administrative fee.

Another EMRD official says, "We have already requested the MIGA to relax its terms and conditions as it is a bit costlier than the other loans we are getting from different sources."

As per MIGA's proposal, some local and foreign banks will arrange the loan for opening LCs for LNG import. The MIGA will be the guarantor on the loans from the commercial banks on behalf of the importer, the state-run Petrobangla.

For the proposed revolving LC-facilitating fund, the lender will charge SOFR- plus 2.0 per cent. Its opening LC period will be three months and the repayment period nine months.

Following Bangladesh's natural gas-supply shortages from its own gas fields across the country-largely for neglecting new explorations-it has imported the liquid gas from overseas market over the last few years in a bid to meet local energy demand.

The LNG  import started in the 2018-2019 period. Since then, imported LNG has played a vital role in meeting the country's growing gas demand.

In 2022, the country imported a substantial quantity of LNG, to the tune 5.06 million metric tonnes, from Qatar Gas, Oman Trading, and the spot market at a cost of US$4.555 billion.

A senior Petrobangla official says the state corporation has planned to import a total of 115 LNG cargoes in 2025-nearly 59 from spot market and 56 from long-term suppliers-which marks a 33.72-percent increase compared to that of the previous year, 2024.

Last year, the country imported a total of 86 LNG cargoes -- 56 from long-term suppliers and 30 from spot market, the official adds.

Bangladesh imported half of last year's total spot LNG cargoes, or 15, in the past three months:  October, November and December. The increase followed the resumption of operations of Summit LNG Terminal after a seven-month shutdown caused by overhauling, technical glitches and damage from cyclone Remal, he says.

Usually, MIGA's Trade Finance Guarantee provides protection against losses resulting from the failure of a state-owned bank or public authority to pay an unconditional financial obligation related to a trade-finance transaction.

Petrobangla started regular LNG import in September 2018. It inked the first-ever SPA with Qatar's RasGas to buy 2.5-million-tonne per year (Mtpa) of lean LNG over 15 years.

In the initial five years of the deal-making, RasGas will supply annually around 1.8 million tonnes of LNG, which will increase up to 2.5 Mtpa in subsequent 10 years.

If Petrobangla has more demand in the first five years, it can increase the import volume annually to 2.5 Mtpa.

Bangladesh will need to import 30-Mtpa LNG to meet the growing local demand by 2041 as domestic gas reserves are depleting fast, according to a global report of the Copenhagen-based research firm Ramboll in association with Geological Survey of Denmark and EQMS Consulting Limited.

The country's "existing gas reserves will run out by 2038 if no new exploration and discovery take place", says the report.

By 2041, Petrobangla predicts, the demand for natural gas will be around 8.0 billion cubic feet per day (Bcfd).

The country's overall gas output now hovers around 2.57 Bcfd, of which 0.50 Bcfd is regasified LNG and the remaining 2.02 Bcfd of gas comes from local gas fields, according to Petrobangla data as of December 25.

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