Petrobangla seeks Tk7,181cr loan to foot LNG import bills

State-owned Petrobangla, the oil gas and mineral corporation of Bangladesh, has sought a loan of Tk7,181 crore from the finance ministry to meet the cost of liquefied natural gas (LNG) import until next September.

The cash-strapped corporation wrote a letter in the last week of May, mentioning that its loss amounted to Tk25,480 crore from 2018 to May this year and it now needs the loan to foot LNG import bills. The amount was over Tk8,000 crore in just one year from May 2022 because of the surge in global LNG spot price.

A finance ministry official told The Business Standard, on condition of anonymity, that an inter-ministerial meeting would be convened to discuss Petrobangla's loan proposal.

"Before that, a comprehensive analysis will be conducted on Petrobangla's overall income and expenditure data, including the status of the gas development fund, the company's accumulated liabilities, and operating costs," the official said, adding that a decision on the loan approval will require "some time."

According to Petrobangla sources, the corporation has also spent almost the entire amount deposited in the Gas Development Fund to meet the cost of LNG import due to the rise in prices in the international market. Out of the total Tk19,000 crore from the fund, only Tk1,500 crore is left now.

The government has provided a subsidy of Tk22,000 crore to Petrobangla since 2018.

The budget for the last financial year included an allocation of about Tk6,000 crore for LNG. It has been fully paid, added the officials.

Subsidy pressure

In the budget for this fiscal year, Tk35,000 crore has been allocated for power sector subsidies. However, Tk30,000 crore will have to be spent to settle the subsidy arrears from the last financial year.

Consequently, only Tk5,000 crore will be available for the Finance Division to allocate for subsidy payments in FY2023-24.

A few weeks back, the finance ministry paid a part of the power sector arrears for July last year by taking a loan of Tk1,800 crore from the Bangladesh Bank.

"Given that the government has to pay an interest rate of 6.75% for borrowing funds from the Bangladesh Bank, it will be incredibly challenging to finance the LNG imports until September of the upcoming financial year while the outstanding dues of the power sector remain unpaid since last August," said another finance ministry official.

He further suggested that Petrobangla should focus on collecting outstanding gas bills as a means of addressing the financial situation.

Petrobangla Director (Finance-Additional Charge) Md Altaf Hossain said, "I am not aware at the moment of the latest progress on the loan application."

Petrobangla Chairman Zanendra Nath Sarker could not be reached on his mobile phone.

LNG import drives

After the outbreak of the Ukraine-Russia war, Bangladesh stopped importing LNG from the spot market due to the gas price hike in the international market.

With gas shortage becoming unbearable, business owners appealed to the government for uninterrupted gas supply, even at higher prices.

Then the price of LNG in the international market started to decrease. In January, the government increased the price of gas in the industrial sector by almost 80% and started importing LNG again from the spot market.

But entrepreneurs have expressed their frustration over the lack of improvement in gas supply even after the tariff rise.

Jashim Uddin, president of the Federation of Bangladesh Chamber of Commerce and Industries (FBCCI), said, "We proposed a gas price increase from Tk16 to Tk25, with the condition of uninterrupted supply. However, even after raising the gas price to Tk30, the government has not provided us with uninterrupted gas supply."

He added that the gas supply crisis is hurting investment.

Bangladesh imported LNG from the spot market for the first time in September 2020. A total of 37 cargoes of LNG have been imported from the spot market till last May.

On 1 June, Bangladesh signed a 15-year agreement with Qatar for importing 1.8 million tonnes of LNG per year, starting in 2026.

The government inked another deal on 19 June to import LNG from 0.25 to 1.5 million tonnes per annum from Oman over a period of 10 years starting from 2026.

Root of Petrobangla's cash woes

Petrobangla's cash crunch started after the government decided to move surplus funds from various government organisations to the treasury in 2020. Like other state-owned offices, Petrobangla had to deposit its idle and surplus funds to the government in September that year.

Petrobangla had to deposit Tk5,871 crore against Tk18,763 crore that was parked with banks at that time. Following this, Petrobangla began to face losses due to the impact of the Covid-19 pandemic and the Russia-Ukraine war when the oil prices shot up and increased Bangladesh's subsidy burden.