Petrobangla picks 8 banks for LNG imports backed by WB guarantee

State-run Petrobangla has selected eight local and foreign commercial banks to facilitate the import of expensive liquefied natural gas (LNG), backed by a repayment guarantee from the World Bank (WB), as Bangladesh seeks to secure its future energy supplies and ease pressure on foreign exchange reserves.

Following a competitive tender, Petrobangla shortlisted three foreign banks - Germany's Deutsche Bank, the Development Bank of Singapore, and Standard Chartered - and five local banks - Prime Bank PLC, Eastern Bank PLC, Dutch-Bangla Bank, the City Bank PLC, and  BRAC Bank PLC - to provide financial support for LNG imports starting in 2026.

"These banks and financial institutions were selected from among 31 banks and 11 consortiums that submitted bids," said AKM Mizanur Rahman, director (finance) of Petrobangla, speaking to The Financial Express on Saturday.

The selected banks will form a consortium to provide Petrobangla with a stand-by letter of credit (SBLC) worth US$200 million, valid for up to 12 months, in favour of long-term LNG suppliers under existing sales and purchase agreements (SPAs).

They will also offer an additional SBLC worth $50 million, valid for up to 90 days, for spot LNG suppliers under master sales and purchase agreements (MSPAs).

In addition, the banks will provide a $100 million credit line in the form of short-term loans with up to a 12-month tenor to help Petrobangla meet payment obligations for specific LNG cargoes under the SPAs and MSPAs.

Petrobangla officials said negotiations are in the final stages before signing the agreements. This financing arrangement comes after the World Bank's board of executive directors approved $350 million in late June under its Energy Sector Security Enhancement Project.

The project aims to improve Bangladesh's gas supply security by facilitating access to affordable financing for LNG imports.

The project will use an International Development Association (IDA) guarantee to mobilise up to $2.1 billion in private capital over the next seven years to support LNG imports.

The IDA, the World Bank's soft-lending arm, will guarantee Petrobangla's repayment obligations to the banks for loans and SBLC draws, covering up to $350 million in principal and accrued interest. However, the guarantee will not cover penalties, default interest, or similar charges.

This marks the first time the World Bank has extended assistance to Bangladesh through a guarantee facility specifically for LNG imports. The multilateral lender typically provides development project loans and budgetary support to the country.

The IDA guarantee is expected to enhance Petrobangla's credit profile, enabling it to secure LNG supplies more effectively amid mounting foreign currency constraints.

The World Bank noted that LNG now accounts for over a quarter of  Bangladesh's total gas consumption, with imports costing around $4.5 billion annually.

Approximately 42 per cent of the country's gas is consumed by the power sector, making LNG supply disruptions a major risk to electricity generation and overall economic activity.

"The project will help Bangladesh enhance gas supply security in a cost-efficient manner, contributing to reliable and affordable electricity for industries and domestic users," said Olayinka Bisiriyu Edebiri, a senior energy specialist at the World Bank.

Bangladesh's growing dependence on imported fuels continues to strain its economy, especially due to challenges in securing foreign currency for essential imports.

Since LNG imports began in 2018, Bangladesh has imported around 30.64 million tonnes of LNG as of May 2025, according to official data from Rupantarita Prakritik Gas Company Ltd.

With domestic gas reserves rapidly depleting, Bangladesh is expected to need 30 million tonnes of LNG per year by 2041 to meet surging demand.  A recent study by Danish consultancy Ramboll, in collaboration with the Geological Survey of Denmark and Bangladesh-based EQMS Consulting, warned that the country's existing gas reserves could be exhausted by 2038 without new discoveries.

Petrobangla projects that by 2041, daily gas demand could reach 8 billion cubic feet, significantly higher than the current supply of around 2.87 billion cubic feet per day.

Of this, approximately 1.02 billion cubic feet come from imported LNG, while 1.85 billion cubic feet are sourced from domestic production.

The banks involved in the financing are optimistic about their role in supporting Bangladesh's energy security.

"Prime Bank is ready to assist and facilitate the government's efforts to secure the country's energy supply," said Tanjil Chowdhury, chairman of Prime Bank. "We have a strong balance sheet and are fully capable of meeting Petrobangla's financing needs. We are proud to partner with the government."

Bangladesh recently cleared all its overdue LNG import bills after facing payment challenges over the past three years.

Petrobangla officials noted that the IDA guarantee, alongside an existing $600 million loan agreement with the International Islamic Trade Finance Corporation (ITFC), will enable the country to make timely payments for LNG imports going forward.

azizjst@yahoo.com