Local, foreign banks scramble for LC financing

Six proposals from national and international commercial banks have so far been received as the bankers queue up for funding Bangladesh's LNG import with the World Bank playing the guarantor, officials said.

Now, they said, the country's energy and mineral resources corporation - nicknamed Petrobangla -- is negotiating with the aspirant banks on the possible rate of interest on their loans and other charges for the import of liquefied natural gas from the global market.

The World Bank's soft lending window, the International Development Association (IDA), has come forward with a US$350 million worth of loan guarantee for facilitating the fuel import to meet Bangladesh's growing energy demand, they said.

"We have got six expressions of interest (EoIs) from national and international banks. Now we are negotiating with them on the rate of interest and other charges," a senior Petrobangla official told the FE Thursday.

They have a plan to suggest the commercial banks to form a consortium to support the government in importing LNG with the guarantee of the multilateral funding agency.

The Washington-based lender's soft-lending window has assured Bangladesh of underwriting loans needed to foot the bill worth $350 million for LNG import. This amount falls under a 'Revolving LC facilities' scheme.

"In the first phase, we have talked to the aspirant commercial banks on their LC-opening rate and charges for other services for the LNG import. We hope we will get a competitive rate from them," says a senior Energy and Mineral Resources Division (EMRD) official.

"After finalising deal with the commercial banks or with their consortium, we will welcome the IDA's guarantee scheme and will open LCs for importing the LNG."

The EMRD considers the WB proposal as a new avenue for Bangladesh in LNG supply to feed the country's growing fuel demand.

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

The proposed first tranche of credits for the first year will be a 'revolving LC facility' for securing the corporation's long-term working capital for smooth import of the liquid gas that supplements the supplies from the national gas grid amid gas-exploration stalemate in the country.

According to the proposal, for the revolving LC-facilitating funds the IDA will charge SOFR-plus 2.0 per cent. Its LC-opening period will be three months and the repayment period nine months.

The EMERD official says after getting the EoI from the commercial banks, they will compare 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 taking the IDA offer."

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

Bangladesh government will borrow $600 million from the 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.

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

Following Bangladesh's natural gas-supply shortages from its own gas fields across the country-largely for neglecting new exploration-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, the imported fuel 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.

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

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," the report reads about the alert.

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