Bangladesh faces Tk 14,000 cr arrears in gas-oil imports

Rafiqul Islam Azad: Bangladesh’s outstanding payments for Liquefied Natural Gas (LNG) and fuel oil imports have surpassed $1.2 billion, amounting to approximately Tk 14,160 crore at the current exchange rate of Tk 118 per dollar. Of this total, LNG arrears up to July have reached $700 million (Tk 8,260 crore), while fuel oil arrears have climbed to over $500 million (Tk 5,900 crore). Suppliers are exerting increasing pressure on the energy department to settle these substantial dues, according to high-level sources.

Officials from the energy department attribute the growing arrears to the scarcity of dollar reserves, warning that if payments are not made promptly, Bangladesh’s energy supply could be jeopardized. However, they remain hopeful that regular payments from the finance department could mitigate this risk significantly.

A senior official from the energy department, speaking anonymously, confirmed the large outstanding amounts owed to international companies (IOCs) under long-term contracts, spot market LNG purchases, and domestic gas extraction. The official stated, “There is some pressure from suppliers to clear the dues. If we receive consistent payments from the finance department, we hope to avoid further complications.”

For a considerable time, Bangladesh had managed to keep the arrears owed to international fuel oil suppliers around $200 million, but in recent months, this figure has surged past $500 million. The energy department has held multiple meetings with Bangladesh Bank to secure the necessary dollars for payment. Despite repeated requests, the required currency has yet to be made available, raising concerns that the energy crisis could worsen if overdue bills are not settled soon.

The Bangladesh Petroleum Corporation (BPC), responsible for importing fuel oil, faces ongoing challenges. On average, 17-18 Letters of Credit (LCs) are opened each month to facilitate these imports, costing approximately $450-500 million. However, only $350-400 million is typically available from Bangladesh Bank and other financial institutions, leaving the remaining amount overdue for 30-45 days.

Further complicating matters, disruptions in banking activities between mid-July and August 10 caused significant delays in payments and nearly halted fuel oil imports. The BPC has set a target to import 5.91 million tonnes of refined fuel oil for the 2024-25 fiscal year, with 3.08 million tonnes under the JTUG agreement and 2.83 million tonnes through open tender. Additionally, the BPC plans to import 1.4 million tonnes of crude oil.

Since 2018, Bangladesh has been importing LNG to bolster its gas supply, purchasing regularly from Qatar and Oman under long-term contracts and from the spot market. Moreover, substantial amounts are owed to foreign companies extracting gas within the country, pushing the total gas sector arrears beyond $700 million.

A Petrobangla official, addressing the arrears issue, acknowledged that the outstanding payments have increased over the past two months. “Regular payment of Petrobangla’s dues is essential for maintaining gas imports and ensuring stable power supply management,” the official said, noting that ongoing communication is being maintained with the finance department.

Currently, both domestic and foreign companies are supplying 200 million cubic feet of extracted gas to the national grid, with an additional 600 million cubic feet coming from LNG. However, due to the shutdown of one LNG terminal, the gas supply is 500 million cubic feet short of capacity. Once the terminal is back online, the pressure to clear LNG import payments will intensify.

Energy expert Professor M. Tamim stressed the critical importance of fuel, oil, and gas for the country’s economy, warning that any disruption in supply management could trigger a major crisis. “The government must prioritize energy security, considering the deep public interest involved. It is also crucial to scrutinize why such a large amount of money remains unpaid, as suppliers may reduce exports if they do not receive payment, risking a severe crisis in the country,” he added.