Petrobangla seeks to double WB LNG guarantee to $710m

Amid mounting domestic gas demand and strain on foreign exchange reserves, Bangladesh wants to secure an additional $350 million guarantee facility from the World Bank to facilitate payments for liquefied natural gas (LNG) imports.

Petrobangla officials said the additional funding would bring the corporation's total guarantee facility to $710 million. Amendment procedures for existing agreements are underway to activate the new facility. The amendment and negotiation process is expected to be completed by August.

According to Petrobangla estimates, by 2041 Bangladesh may need about 30 million tonnes of LNG annually. By that time, daily gas demand could reach around 8 billion cubic feet.

Petrobangla Director (Finance) A.K.M. Mizanur Rahman said the existing financing framework currently totals $350 million. Steps have now been taken to increase it to $710 million. Consequently, the four existing agreements will need to be amended or restructured.

He further said a high-level negotiation committee has been formed comprising representatives from various ministries, Bangladesh Bank and Petrobangla. The committee is actively negotiating with the World Bank and a consortium of three Singapore-based banks.

The existing $350 million facility from the World Bank under the Energy Sector Security Enhancement Project was approved on 18 June 2025. The project became operational in early 2026 and its tenure is until 31 December 2031.

Petrobangla expects the facility to become operational by November this year. Meanwhile, the Economic Relations Division (ERD) will present the proposal at the World Bank Board meeting in October, and the funds could be disbursed in November.

The total $710 million facility is not a direct loan; it is a non-funded or contingent financing facility. Its primary purpose is to provide payment guarantees for LNG imports.

Under the proposed structure, $650 million will be in the form of Standby Letters of Credit (SBLCs), which will be used as payment guarantees for LNG imports. The remaining $60 million will be kept as a credit support line, which can be utilised if needed.

Officials said that to avail of the facility, Petrobangla must issue the SBLCs by November.

The existing facility is structured similarly. It included a $50 million credit line, which has not yet been used. The remaining $300 million was for LNG imports, of which $250 million was against long-term LNG supply contracts and $50 million for spot-market purchases.

Of the $250 million under long-term contracts, Petrobangla has already utilised about $235 million. The $50 million spot facility has been used twice, and the process for a third utilisation is ongoing.

An important feature of this financing facility is that once payments are completed, it becomes reusable.

Officials said the new facility will help Bangladesh increase its LNG import capacity without adding to foreign exchange pressures. At the same time, it is expected to serve as an effective financial framework to ensure energy security.

With declining domestic gas production, reliance on imported LNG to meet demand in power generation, industry and other sectors is steadily increasing. According to Petrobangla data, from 2018 to April 2026, Bangladesh imported approximately 37.014 million tonnes of LNG through 597 cargoes.

LNG imports in Bangladesh are carried out through three channels: long-term contracts, short-term contracts and spot-market purchases. Under long-term contracts, QatarEnergy and Oman's OQ Trading are key suppliers. Besides, Petrobangla also buys LNG from the spot market as needed.

The country's import costs fluctuate with changes in international LNG prices and supply conditions. In 2025, Bangladesh's LNG imports increased significantly compared with the previous year. At the same time, with domestic gas production declining, future import requirements are expected to rise further.

Meanwhile, recent conflicts in the Middle East and volatility in the global energy market have created new risks for LNG supply and prices. If there is any disruption to long-term contract supplies, Petrobangla may need to buy additional LNG from the spot market. This could further increase import costs and put additional pressure on foreign exchange reserves.