WB's extra $350 million takes effect from 2027

The World Bank's additional US$ 350 million worth of loan guarantee to facilitate Bangladesh's liquefied natural gas (LNG) import payments is expected to be effective from 2027.
The additional financing, which was approved on May 15 under the Energy Sector Security Enhancement Project (ESSEP), will help strengthen Bangladesh's energy security by facilitating cost-effective mechanisms to import LNG amid global fuel market volatility, state-run Petrobangla's director of finance, AKM Mizanur Rahman told The Financial Express on Tuesday.
He said the WB's assistance backed by IDA guarantee will scale up support to cover Petrobangla's payments for LNG imports.
The second tranche of the WB's additional financing is being implemented by Bangladesh Oil, Gas and Mineral Corporation, also known as Petrobangla.
The aim is to issue standby letter of credit (SBLC) favouring three LNG suppliers -- Qatar Energy, OQT of Oman and Excelerate Energy -- under long term contracts.
Loan negotiation over the additional financing would take place in Singapore soon, where the loan negotiation committee comprising the government of Bangladesh, the IDA and financial institutions in Singapore will take part.
After successful loan negotiation, Petrobangla will have to sign project agreement with the IDA, facility agreement with lenders in Singapore and the Finance Division under the Ministry of Finance will have to sign indemnity agreement with IDA, he said.
Petrobangla will have to take necessary approval from the relevant authorities beforehand.
Petrobangla will have to issue SBLC before 30 November 2026 in favour of three LNG suppliers against five long term contracts.
This would save a significant amount of financing cost through lowering expenses and zero cash margin, said the Petrobangla official.
Market insiders said Bangladesh relies on imported LNG to meet electricity demand, particularly for power generation and industrial production.
Disruptions in global energy markets due to the Middle East crisis have heightened price volatility and supply risks, placing pressure on foreign exchange reserves and public finances.
A prolonged conflict in the Middle East would materially impact fuel and fertilizer supplies, with the poorest households hardest hit.
The original ESSEP worth $350 million, which was approved by the World Bank Board on June 18, 2025, became effective from early 2026 and is scheduled to run until December 31, 2031.
Under the existing facility, Petrobangla has selected eight local and foreign commercial banks to facilitate LNG imports, backed by a World Bank repayment guarantee.
Following a competitive tender, Petrobangla last year selected three foreign banks and five local banks to provide financial support for LNG imports starting in 2026.
The selected banks formed a consortium to provide Petrobangla with a SBLC worth $200 million, valid for up to 12 months, in favor of long-term LNG suppliers under existing sales and purchase agreements, or SPAs.
They also offer an additional SBLC worth $50 million, valid for up to 90 days, for spot LNG suppliers under master sales and purchase agreements (MSPAs).
In addition, the banks provide a $100 million credit line in the form of short-term loans with up to a 12-month tenor to help Petrobangla meet payment obligations for specific LNG cargoes under the SPAs and MSPAs.
With domestic gas reserves rapidly depleting, Bangladesh is expected to need 30 million tonne (mt) of LNG per year by 2041 to meet surging demand, according to official data of Petrobangla.
Daily gas demand could reach 8 Bcf/d, significantly higher than the current supply of around 2.83 Bcf/d as of July 23, according to the data.
Since Bangladesh's LNG imports began in 2018, the country has imported approximately 37.014 million tonnes of LNG through 597 cargoes as of April 2026, according to RPGCL data.
Bangladesh's overall natural gas supplies were around 2.59 billion cubic feet/d, including 929 million cubic feet/day of re-gasified LNG, according to official Petrobangla data as of June 8.

Azizjst@yahoo.com