LNG import hits impasse for payment imbroglio

Liquefied natural gas (LNG) import from two gulf countries hits impasse as the renewal of standby letter of credit (SBLC) stalls for payment-guarantee refusal by regulators, apparently for forex crunch.
Officials have said the LC renewal for the import of LNG from Qatar and the United Arab Emirates faces setback as the central bank declined to give payment confirmation to two foreign banks in the event of local banks failing to make payment in foreign currencies.
On refusal by the Bangladesh Bank, energy and mineral resources division itself moved to provide payment guarantee and sought finance division's consent.
However, the approval has yet to be received though the renewal was due on November 30 in line with the LNG-sale and-purchase agreement with Doha-based Qatargas and Dubai-based OQ Trading Ltd.
State-run Petrobangla imports LNG from the two suppliers on government-to-government deals to meet unmet demand in electricity generation and export-oriented sectors.
The energy corporation signed sale-and-purchase agreement with Ras Laffan Liquified Natural Gas Company Ltd (III), operated by Qatargas, back in August 2018 and with OQ Trading Ltd in January 2019.
Apart from import from these two companies, Petrobangla also buys in LNG from spot market in the wake of gas shortage for what critics say lack of urgency of domestic hydrocarbon exploration to feed growing needs.
The import from open market began in September 2020.
The sources have said since the very beginning of LNG import from the two companies, Hong Kong and Shanghai Banking Corporation (HSBC) and Standard Chartered Bank (SCB) had issued standby letters of credit (SBLCs) in favour of Qatargas and OQ Trading Ltd respectively with approval from energy and mineral resources division.
The two SBLCs, amounting to $194.01 million and $104.25 million, both having one-year tenure, were last time renewed late last year and supposed to be renewed by November 30, 2023 to import LNG in 2024.
The Petrobangla for next year wants to renew the SLBC in favour of Qatargas, raising the amount to $235.39 million, and lower the SLBC for OQ Trading Ltd to $87.77 million.
Officials said in September the corporation requested the two banking multinationals-HSBC and SCB-to send offer letters to renew the SLBCs. Both the banks sent offer letters but at the same time requested the Petrobangla for taking necessary steps to furnish a confirmation letter/letter of comfort from the central bank ensuring payments in case of local banks' failure.
Thereafter, officials said, the energy and mineral resources division wrote to the central bank for issuing confirmation letter or letter of comfort. However, the central bank was learnt to have demurred, saying that it does not issue such letter for renewing SLBC.
According to officials concerned, Petrobangla provides payment to its local banks in local currency against the invoices for LNG import regularly. But the local banks fail to make payment in foreign currencies to HSBC and SCB in time due to shortage of required foreign currencies.
As the central bank declined to issue confirmation letter or letter of comfort, the two banks requested the energy and mineral resources division itself to provide payment guarantee for the renewal of the SBLCs.
Following the developments the energy and mineral resources division on November 29, in a letter written by joint secretary Zakir Hossain, sought approval from the finance division, as it wants to provide payment guarantee for continuation of LNG import.
However, a senior official at the energy and mineral resources division confirmed that the issue "still remained pending" and they were yet to receive approval from the finance division to furnish payment guarantee.
"We are continuing discussion with the finance division," the official told the FE, seeking anonymity.
Petrobangla chairman Zanendra Nath Sarker could not be reached for comment despite several attempts.

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