Cash purchase of gas from Chevron on cards

 Highlights: 

•  Chevron supplies gas worth $40m per month
• Total outstanding dues $225m as of 10 Sept
• $10-15m from dues to be paid per month
• This is expected to settle full dues in one year
• Chevron extracts gas from Bibiyana and Jalalabad fields
• Its gas accounts for 45% of total supply

The interim government plans to gradually pay off Chevron’s $225 million outstanding dues while regularly paying for newly supplied gas in cash to ensure that the full amount owed to the company is settled within a period of next one year. 

Currently, Chevron supplies gas to the government worth an average of $40 million per month.

A senior official at the Ministry of Energy, requesting anonymity, told TBS that along with the $40 million payment for the gas supplied each month, an additional $10-15 million from the outstanding dues will also be paid to Chevron. 

“In this way, the government plans to clear all of Chevron’s outstanding dues within a maximum of one year,” he said.

Chevron extracts gas from Moulvibazar’s Bibiyana and Sylhet’s Jalalabad gas fields and supplies it to the government. Of these, the Bibiyana field supplies the highest amount of gas for the company. According to data from Petrobangla, around 45% of the total gas supply comes from Chevron’s gas supply.

In light of the instability in the country’s banking sector and foreign currency reserves, Chevron, like other foreign companies supplying oil, gas, and electricity to Bangladesh, is pressing the government to settle its dues. 

A delegation from Chevron met Finance and Commerce Adviser Salehuddin Ahmed yesterday and requested the payment of its outstanding dues.

Officials say the outstanding dues for gas and electricity increased significantly due to the internet shutdown during the Anti-Discrimination Student Movement in July. Although the amount of overdue payments in the power sector did not decrease much last month, the government is prioritising the payment of overdue bills in the energy sector to ensure an uninterrupted energy supply.

Outstanding dues in energy sector rises to $1.7 billion

According to sources in the Energy Division, at the beginning of August, the outstanding dues in the energy sector had risen to $1.7 billion. Due to the halt in remittance inflows during the student-led protests, banks also faced a dollar shortage. 

The situation became so critical that two LNG cargoes were on the verge of being sent back on 2 and 9 September because payments were not made on time. Later, with special approval from Chief Adviser Professor Muhammad Yunus, the Energy Division arranged for the release of these two cargoes by securing dollars from the Bangladesh Bank.

The interim government has now taken steps to pay off the outstanding dues to ensure the regular supply of strategic commodities like oil and gas. As a result, by September 10, the outstanding bills in the energy sector have been reduced to approximately $900 million.

Of the total outstanding dues, $270 million is owed for oil imports, around $400 million for LNG imports, and $225 million to Chevron. 

On the other hand, $1.1 billion is outstanding for electricity imports. This includes $500 million owed to India’s Adani Group, $590 million to the Indian central government, and $10 million to the Tripura government.

As data from the Bangladesh Power Development Board (BPDB) show, Indian power plants are supplying less electricity to Bangladesh compared to their production capacity.

India’s Adani Group pressing for payment

According to reports in Indian newspapers, Adani Group has already sent a letter to Prof Yunus, urging the payment of outstanding dues to ensure a sustainable electricity supply. Previously, Adani Power officials had met relevant Bangladeshi authorities, pressing for the payment of dues and warning that it would not be possible to continue supplying electricity if the payments were not made. 

In August, the Indian government passed a law allowing it to purchase electricity produced by Adani’s Jharkhand power plant — a move taken apparently to create pressure on Bangladesh if it fails to make payments.

According to information published on the BPDB website, Adani Power has been supplying 1,000 megawatts of electricity for several weeks, even though the plant’s production capacity is 1,496 megawatts. 

Additionally, electricity supply from Tripura has been limited to between 60 and 100 megawatts for a long time, while the agreement with Tripura stipulates a supply of 160 megawatts.

According to the BPDB report, while the Indian government’s national grid is supposed to supply 1,000 megawatts of electricity to Bangladesh through the Bheramara HVDC Interconnector, the supply has been consistently between 800 and 900 megawatts for a long time. On the other hand, the outstanding dues for electricity subsidies to the Finance Division amount to approximately Tk42,000 crore.

Since taking office, Power and Energy Adviser Muhammad Fouzul Kabir Khan has stated that there is an outstanding amount of approximately $2.2 billion for imports in the energy and power sectors. To address the outstanding amount, the government has requested $2 billion in budget support from the World Bank and the Asian Development Bank, according to him.

According to sources in the Finance Division, despite the previous government’s paying subsidies through bonds, there is still an outstanding amount of Tk42,000 crore for subsidies to private power plants in the country.

Some private companies have expressed doubts about keeping their plants operational if their dues are not settled, and have sent letters to the Power Division regarding the issue. On the other hand, the International Monetary Fund has set conditions for the government, requiring it to refrain from using bonds to pay subsidy amounts.

Push for additional loan

The senior official from the Energy Division said a letter has been sent to the Islamic Trade Finance Corporation requesting the release of an additional $350 million from the approved loan. 

This year, the Islamic Trade Finance Corporation approved a $2.1 billion loan for the import of fuel oil and LNG, with $1.6 billion allocated for fuel oil and the remaining $500 million for LNG, he said. Once the $350 million is received from the Islamic Trade Finance Corporation, it will be used to settle the outstanding dues with fuel oil and LNG suppliers, said the official.

According to Energy Division officials, to avoid any issues with the import of fuel oil and LNG due to the dollar shortage faced by banks, multiple government and private banks will be used to open letters of credit (LCs) in the future. 

Previously, only Sonali Bank was used for opening LCs for fuel oil imports. When Sonali Bank could not provide dollars, the dues were settled with dollars from the Bangladesh Bank. However, as the Bangladesh Bank has stopped supplying dollars, discussions are underway to open LCs through other banks, including Janata, Agrani, Rupali, and Prime Bank.