With overdue bills cleared, BD set for regular payments to LNG, oil suppliers

Bangladesh is now optimistic enough about paying the suppliers of liquefied natural gas (LNG) and petroleum products and international oil companies (IOCs) on a regular basis in the future.

"As all overdue bills are cleared now, making timely payments to energy suppliers in the future will no longer be a problem. It has paved the way for buying both LNG and petroleum products at cheaper rates," Adviser of the Ministry of Power, Energy and Mineral Resources Muhammad Fouzul Kabir Khan told The Financial Express on Tuesday.

State-run Petrobangla and Bangladesh Petroleum Corporation (BPC) have settled all outstanding payments over the past several months.

"We have cleared around US$1.17 billion," said the adviser. Of the total, US$600 million was owed to LNG suppliers and IOCs and the remaining US$570 million was owed to oil suppliers.

Bangladesh had been struggling to make payments to LNG suppliers over the past two years following the global economic turmoil caused by the ongoing war between Russia and Ukraine amid sharp currency devaluation.

Petrobangla owed around $320 million to two long-term LNG suppliers -- QatarEnergy and Oman Trading International - as of August 5, 2024 when the previous government was overthrown amid a student-led popular uprising, Petrobangla's Director for Finance AKM Mizanur Rahman said.

On the other hand, Petrobangla owed around $110 million to spot LNG suppliers, while around US$170 million to IOCs, said Mr Rahman.

"Clearing all overdue payments required nothing but planned and efficient management," energy adviser said. "After assuming office, I found a huge amount of unpaid bills across different energy segments. Besides, penalties for delayed LNG payment also rose to around $60 million.

"I immediately took steps to make the overdue payment to build a positive image among suppliers and get rid of huge financial penalties because of late payment. To arrange money quickly, we discarded some unnecessary costs from the development projects. We also checked wastage that helped save money.

"We also involved private commercial banks for the first time to arrange US dollars and open letters of credit (LCs) to import LNG and petroleum products and clear outstanding dues as the state-run commercial banks were struggling to arrange dollars and open LCs to import energy.

"With the support from Bangladesh Bank, we have arranged state sovereign guarantee for the private commercial banks who are arranging dollars, opening LCs for imports of energy product," said the adviser elaborating the mechanism behind clearing overdue bills within a very short span of time.

Previously Bangladesh was dependent only on state-run commercial banks having sovereign guarantee to arrange dollars and open LCs.

Bangladesh's significant growth in remittance inflows since the very beginning of the interim government also helped sourcing dollars and pay bill arrears. The turnaround in remittance earnings came as the central bank relaxed its grip, allowing banks to offer slightly higher rates to attract remittance inflows and other dollar sources.

This flexibility offered banks an opportunity to accumulate foreign currency and channel it towards critical energy payments.

According to Bangladesh Bank data, Bangladesh fetched 28.3% more remittance earnings to the tune of $24.54 billion during the first 10 months of the current fiscal year 2024-25 compared to $19.11 billion during the first 10 months of the last fiscal year 2023-24.

Azizjst@yahoo.com