Oil import faces uncertainty as Bangladesh's petroleum agency couldn't clear payment arrears to foreign suppliers due to dollar crunch, irking the exporters to threaten shipment suspension, said sources.
The State-run Bangladesh Petroleum Corporation (BPC) alone owes around US$300 million to different refined oil suppliers, as of May 16, 2023, market-insiders said, while other energy agencies are also indebted for payment backlog.
All the petroleum oil suppliers to Bangladesh have become upset over delayed payments and requested clearing the dues immediately, BPC director for operations and planning Khalid Ahmed told the FE Thursday.
"Some of the oil suppliers have warned of stopping oil supply to Bangladesh unless the dues are cleared immediately," Ahmed said.
Such problem, incidentally, arises at a time when the country struggles to meet energy demand from consumers, including industries.
Over the past several months, the BPC could pay around one-third to half of the total payment arrears to some of the oil suppliers after the deadlines had elapsed, it has been alleged.
Citing an example of delayed payment an insider said Dubai's Emirates National Oil Company got only US$ 10 million from the BPC on May 9, 2023 although its pending bills mounted to around US$30.82 million having March 27, 2023 as payment deadline.
The petroleum corporation also failed to pay a single penny to some other suppliers, said the BPC official.
"We did never face such a situation over payments in the past," said Ahmed, adding that BPC could always clear payments to oil suppliers within the cutoff time for payment.
Like some other state energy firms in Bangladesh, the BPC is also now struggling to pay dues to foreign suppliers in US dollar, he acknowledged.
The state companies, like Petrobangla and Bangladesh Power Development Board (BPDB), have been hit by fallouts from the country's falling foreign-exchange reserves as the taka trades at a record low to the dollar. As such, arrears to several companies have been piling up.
The BPC would clear payments within eight to ten days over the 30-day deadline for oil loading by suppliers until the end of February 2023, a senior BPC official ruminates.
But from March and onwards the BPC could not pay off full dues to any of the oil suppliers, said sources.
Usually, the agency does have very little in hand if it does not get US dollars from commercial banks for making payment, Ahmed said. BPC purchases oil from the international market in US dollar and sells to end-users in local currency.
"We have talked over the issue with the governor of the central bank to arrange US dollars for making payment to the suppliers," said the top BPC official. "But we have yet to get any remedy."
BPC expects to import around 7.69 million tonnes of refined petroleum products this calendar year, up 18.3 per cent from 6.5 million tonnes in 2022.
The fuel comprises around 5.31 million tonnes of 0.005-percent sulfur gasoil (diesel), 700,000 tonnes of Jet A-1 fuel, 600,800 tonnes of 95 RON gasoline (octane), 900,000 tonnes of high-sulfur fuel oil with 3.5-percent sulfur and 180,000 tonnes of 0.50-percent- sulfur marine fuel.
Separately, the country's private sector is likely to import around 3.50 million tonnes of furnace oil, sources said.
BPC has nine listed suppliers of refined oil products under government-to-government arrangements, which include Kuwait Petroleum Corp, Malaysia's Petco Trading Labuan Company, Dubai's Emirates National Oil Company, China's PetroChina, Indonesia's PT Bumi Siak Pusako, China's Unipec, Thailand's PTT International Trading and India's Numaligarh Refinery Ltd (NRL) and Indian Oil Corporation.
The corporation has been sourcing around half of its total refined oils through international tendering system and the remaining half through government-to-government negotiations with state-run oil suppliers across the world.
It usually floats tenders twice every calendar year to import its refined oil products during January-to-June and July-December periods to fix premium rates. It also enters into negotiation with the selected suppliers twice to fix the petroleum prices.
BPC fears to have higher price quotes from oil suppliers for future purchase if the dues are not cleared soon.
"Currently, private-sector owners are also not getting sufficient US dollars from the central bank to import furnace oil," president of Bangladesh Independent Power Producers' Association, or BIPPA, Faisal Khan told the FE Thursday.
He said the government had slowed paying dues to many private power plants since September 2022 and currently BPDB owes around Tk 180 billion (around $1.80 billion) to private power-plant owners.
Bangladesh has been facing an acute dollar crisis since the commencement of the Russia-Ukraine war in February 2022. The country's foreign-currency reserves dropped to around $30 billion last week from a record $48.6 billion in August 2021.
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