Bangladesh Will Pay $960 Million On a Monthly Basis to Clear Energy Dues Amidst Financial Challenges
Bangladesh has taken decisive steps to address its energy dues and ensure an uninterrupted power supply despite facing financial challenges. Prime Minister Sheikh Hasina has directed the payment of approximately $960 million monthly starting from July to clear outstanding debts to LNG suppliers, international oil companies (IOCs), and power plant owners. With the next general election approaching in January 2024, the government is determined to settle energy bills with the support of global lenders and attract foreign investments.
Clearing Debt for Uninterrupted Energy Supplies
To maintain uninterrupted natural gas supplies, Bangladesh’s state-run Petrobangla Chairman, Zanendra Nath Sarker, emphasized the urgent need to clear debts to LNG suppliers and IOCs. Of the monthly payment, $160 million will be allocated to the Power Division under the Ministry of Power, Energy, and Mineral Resources (MPEMR) to settle dues with power plant owners. Another $80 million will go to the Energy and Mineral Resources Division (EMRD) for payments to LNG suppliers and IOCs.
Funding for Energy Sector and Borrowing Initiatives
The MPEMR’s Power Division has requested $5.921 billion for the fiscal year 2023-24 to ensure uninterrupted electricity supply. In response to financial constraints, Bangladesh is seeking support from global lenders to avoid disruptions ahead of the upcoming general election. Petrobangla is currently in discussions to borrow approximately $500 million from the Islamic Trade Finance Corporation.
Clearing a Complex Web of Debts
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. The commitment to clearing these debts is crucial to maintaining a stable energy sector and bolstering investor confidence.
Attracting Foreign Investors with a New Model Production Sharing Contract
In a bid to attract foreign investments, Bangladesh has recently approved its first-ever Brent crude-linked model production sharing contract. This innovative model is based on a profit-sharing formula, offering enhanced output shares to investors and permitting companies to export natural gas once domestic demand is met. The hydrocarbon price in the model contract is linked to the benchmark used for purchasing LNG.
Government’s Commitment to Energy Sector Development
Despite facing setbacks in deepwater exploration efforts in the past, the government of Bangladesh remains steadfast in its commitment to developing the energy sector. The newly approved model production sharing contract reflects the nation’s determination to strengthen its energy landscape and attract foreign investments, creating a path for sustainable energy development.
Conclusion
Bangladesh’s resolve to clear energy dues and maintain uninterrupted energy supplies demonstrates its commitment to the growth and stability of the energy sector. By seeking support from global lenders and implementing a new model production-sharing contract, the government is working towards attracting foreign investors and unlocking the potential of its energy resources. As the nation navigates through financial challenges, its dedication to developing a robust energy sector remains unwavering, setting the stage for a brighter and sustainable future.
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