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Quest for LNG funding

Govt keen on ITFC credits as ADB looks noncommittal

Syful Islam | February 03, 2018 00:00:00

A government body eagerly looks to the International Islamic Trade Finance Corporation (ITFC) as main source for financing huge investment needs in the emerging LNG sector, officials said.

It found the rate of interest charged by the ITFC, 3.8 per cent, lowest among other financiers and possible sources and so drew the conclusion that steps could be taken to negotiate loan from this trade financing arm of the Islamic Development Bank (IDB) Group.

Power Division additional secretary Zakir Hossain headed the inter-ministerial committee which was formed last October to search out sources of funds for the LNG (liquefied natural gas) sector-being billed as a major alternative source of much-needed fuel.

According to committee officials, some Tk 280 billion will be needed annually to finance LNG import and infrastructure-development works for this energy turf.

The Bangladesh Energy Regulatory Commission approved using some Tk 70 billion from an existing energy-security fund to cater the LNG-sector needs.

The committee viewed that the present fund demand could be met with the Tk 70 billion- revolving fund provided the LNG-sale proceeds are received in time and no subsidy need to be provided.

But officials said to make this liquefied gas available to consumers at a rational rate, subsidy has to be provided to some extent. Besides, the sales proceeds may not reach Rupantarita Prakritik Gas Company Limited (RPGCL) immediate after the selling of LNG.

So, a financial gap may occur which may not be covered with the revolving fund of Tk 70 billion, said a member of the committee.

Sources said the committee was told that the Economic Relations Division (ERD) wrote to the Asian Development Bank (ADB) regarding LNG financing but was yet to receive any response.

On the other hand, the financial state of RPGCL and the present condition of country's stock market do not show any possibility of getting funds from there.

RPGCL, a Petrobangla company which will look after the LNG issue, presently has no ongoing project and thus getting funds from the stock market by offloading shares may not be feasible, the committee was informed.

Bangladesh Bank informed that it cannot directly provide money for LNG financing. But it can be part of syndication loan with the ITFC for LNG import. It suggested exploring the possibility of getting loan from the ITFC.

Contacted over telephone Friday, committee chief Zakir Hossain, however, did not want to disclose any information regarding the decision.

Petrobangla chairman Abul Mansur Md Faizullah told the FE Friday that the Tk 70- billion revolving fund will somewhat help in initial financing of LNG import and related investment.

"But we will also need external financing or some more funds from the government to meet the full need," he said.

Mr Faizullah was hopeful that LNG would enter the country by April and be supplied to the consumers immediately.

The government had taken the decision to import LNG due to short supply of natural gas from the domestic fields to a growing demand. Presently, around 2,700 million cubic feet per day (mmcfd) of gas is being supplied against the demand for 3,300mmcfd.

The shortfall has long been affecting power generation and industrial production as well as households. According to energy division estimates, gas demand may reach 8,000mmcfd by 2041, but supplies from the local sources would then dwindle significantly unless there were substantial new discoveries.

Meanwhile, a process is underway to float US$1.0 billion international bond by Bangladesh Power Development Board (BPDB) and Tk 5.0 billion worth of bond by Ashuganj Power Plant for importing LNG for own uses.

Petrobangla will import LNG from different countries like Oman, Qatar, Switzerland, and Indonesia and will supply the fuel into the national grid after re-gasification.

So far, it has signed deals with three companies for the setting up of three floating storage re-gasification units (FSRUs). Setting up a land-based LNG terminal is also under consideration-the government already received over a dozen proposals for the terminal project.

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