In a bid to secure uninterrupted energy supplies and maintain stability in the run-up to scheduled elections, Bangladesh has taken decisive action to clear its outstanding payments to LNG suppliers, international oil companies (IOCs), and power plant owners. Prime Minister Sheikh Hasina directed the initiative, setting forth a plan to allocate approximately $960 million per month starting from July.
Under this plan, each week, $160 million will be allocated to the Power Division under the Ministry of Power, Energy, and Mineral Resources (MPEMR) to settle debts with power plant owners, while $80 million will be designated for the Energy and Mineral Resources Division (EMRD) to make payments to LNG suppliers and IOCs. The move comes as Petrobangla Chairman Zanendra Nath Sarker emphasized the necessity of clearing debts to ensure a consistent natural gas supply. To address ongoing financial challenges, the MPEMR’s Power Division has requested around $5.921 billion for the fiscal year 2023-24, aiming to ensure continuous electricity supply.
The government’s commitment to clearing energy bills is also bolstered by the support of global lenders, allowing Bangladesh to steer clear of any disruptions leading up to the next general election in January 2024. In addition to managing its outstanding payments, Bangladesh is actively working to attract foreign investors in the energy sector. The country’s cabinet committee on economic affairs recently gave the green light to Bangladesh’s first-ever Brent crude-linked model production sharing contract.
This innovative model, based on a profit-sharing formula, offers enhanced output shares to investors and allows companies to export natural gas once domestic demand is met. Notably, the hydrocarbon price in the model contract is linked to the same benchmark used to purchase LNG. Prime Minister Sheikh Hasina’s government remains steadfast in its commitment to achieving breakthroughs in the energy sector. Despite past challenges in deep water exploration efforts, the administration remains focused on driving advancements and development in the country’s energy industry.
Furthermore, in a move to bolster its financial position, Petrobangla is currently in discussions to borrow approximately $500 million from the Islamic Trade Finance Corporation. As of June, the government owed substantial amounts to various entities, including $2.4 billion to private independent power producers, $475 million for electricity imports from India, $350 million to gas companies, and $320 million to LNG suppliers. With this concerted effort to clear debts and attract foreign investment, Bangladesh aims to ensure a stable and reliable energy supply while laying the groundwork for sustainable growth in the energy sector.