Energy sector dues reduced from $750m to $240m

Bangladesh gas sector has been grappling with the burden of payments for the past three years. Due to a persistent dollar crisis, Bangladesh Oil, Gas and Mineral Corporation (Petrobangla) had been unable to make regular payments. Suppliers had been exerting pressure over unpaid invoices, resulting in disruptions to imports. However, the situation is now changing. The interim government has significantly reduced gas-related arrears, with a major portion already settled.

According to Petrobangla sources, the previous Awami League government had left a large volume of arrears. As of 5 August, outstanding payments in the gas sector were approximately $750 million (75 crore). Following the assumption of office by the interim government, imports of liquefied natural gas (LNG) were increased.

Simultaneously, steps were taken to ensure the regular settlement of current bills as well as the repayment of past dues. Consequently, as of 19 April, the arrears have decreased to $240 million (24 crore).

Officials from the Energy and Mineral Resources Division and Petrobangla stated that even at the end of February this year, arrears stood at $710 million (75 crore); however, within the past one and a half months, the majority of that amount has been cleared. Between 7 and 16 April, within just six banking days, $180 million (18 crore) was paid. It is anticipated that by the end of the current month, the arrears will fall below $100 million (10 crore). The dollar crisis escalated following the onset of the Russia-Ukraine war in February 2022, leading to a build-up of unpaid gas bills. To mitigate the crisis, the former government halted open-market LNG imports for seven consecutive months starting in July of that year, which in turn triggered a gas supply crisis.

As a result, from September 2022, the then-government began officially announcing load-shedding. Overall, the final two and a half years of the previous government were marked by persistent energy shortages. Load-shedding occurred during peak electricity demand periods and at the same time, arrears continued to rise. In January 2023, the government raised gas prices by an average of 82 per cent in the name of ensuring uninterrupted supply; however, it still failed to deliver consistent gas supplies.

Muhammad Faozul Kabir Khan, Adviser to the Ministry of Power, Energy and Mineral Resources told Prothom Alo that the previous government had driven the energy sector to the slump. He added that it is impossible to recover from such a situation while accumulating arrears. Delays in payments incur penalties and increase costs. Tenders would attract higher bids due to the payment delays, but now those costs are decreasing. The primary objective is to reduce expenditure in the energy sector. Reduced expenditure would, in turn, lead to lower subsidies.

This year, ahead of the summer season, the Energy Division and Petrobangla became more active in repaying arrears. According to sources from both organisations, after three years, the full amount owed to the US multinational company Chevron has been repaid.

Chevron supplies approximately 55 per cent of the gas produced domestically in Bangladesh. On average, Chevron must be paid around $40 million (4 crore) per month. From mid-2022, Chevron’s arrears began to mount. During the previous government’s tenure, the company sent multiple letters demanding payment of its dues.

Sources from the Energy Division and Petrobangla confirmed that as of 5 August, when the Awami League government stepped down, Petrobangla owed Chevron approximately $240 million (24 crore). In August, Chevron was paid less than its regular monthly bill. However, from September onwards, Petrobangla began paying almost double the monthly invoice amount. In the past eight months, more than $500 million (50 crore) has been paid to Chevron, covering all the bills. At present, Petrobangla owes Chevron no arrears.

In addition to domestic gas, the government regularly imports LNG from Qatar and Oman. Several foreign companies also supply LNG through the open market.

Furthermore, the country’s two operational LNG terminals must be paid in dollars every month for conversion services.

The previous government left behind $430 million (43 crore) in unpaid LNG bills. However, there are no arrears related to the use of LNG terminals. The interim government has reduced the LNG arrears to below half.

According to the Energy Division and Petrobangla, there remains $114.7 million (11 crore 47 lakh) in arrears under long-term LNG contracts, and an additional $110 million (11 crore) is owed for LNG purchased from the open market. Beyond that, over $10 million (1 crore) is owed to the two LNG terminals.

Petrobangla’s Director (Finance), A.K.M Mizanur Rahman told Prothom Alo that under the directives of the Energy Adviser, a joint initiative involving Petrobangla, the Ministry of Finance, Bangladesh Bank and related organisations has enabled the repayment of a significant portion of the gas sector’s arrears. The Ministry of Finance has also increased the provision for subsidies.

* The report, originally published in the print and online edition of Prothom Alo, has been rewritten in English by Nuzhat Tabassum Tithi