LNG subsidy hits Tk10,300cr in first three months of FY27
The latest Tk3,000 crore tranche was released on 21 September, taking total LNG subsidy disbursement for July-September to Tk10,300 crore, according to Petrobangla.
Highlights:
- July-Sept subsidy reaches 70.5% of FY26's Tk14,600cr spending
- LNG import cost averages Tk46.40/m³, selling price stands at Tk23.90/m³
- Cost-selling price gap reaches Tk22.50//m³
- Supply disruptions push Petrobangla towards expensive spot-market LNG
- LNG subsidy surges 143% to Tk14,600cr in FY26 from Tk6,000cr in FY24
The government has released Tk10,300 crore in subsidies for liquefied natural gas (LNG) imports in the first three months of the current fiscal year, as Bangladesh has increasingly relied on costly spot-market cargoes after disruptions to long-term supplies amid the Iran-US war and its regional fallout.
The latest Tk3,000 crore tranche was released on 21 September, taking total LNG subsidy disbursement for July-September to Tk10,300 crore, according to Petrobangla figures.
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The amount is equivalent to 70.5% of the Tk14,600 crore subsidy spent on LNG imports during the entire FY2025-26. It is also 71.7% higher than the Tk6,000 crore originally allocated for LNG subsidy last fiscal year.
Petrobangla data show that the government has provided about Tk20,900 crore in LNG subsidy since 17 February, when the current government took office, through 21 September.
The rapid rise in subsidy created a widening gap between the cost of imported LNG and the price at which gas is sold domestically.
During July-September, the blended average cost stood at Tk46.40 per cubic metre, against a weighted average sales price of Tk23.90, leaving a gap of Tk22.50 per cubic metre, which is being paid as a subsidy.
War pushes Bangladesh into expensive spot market
The subsidy burden began rising sharply following the Iran-US war, which disrupted LNG shipments from the Middle East to Asia and effectively choked the Strait of Hormuz, through which a significant share of global LNG trade normally passes.
QatarEnergy, Bangladesh's largest LNG supplier, declared force majeure while OQT of Oman and Excelerate also followed the suit forcing the Petrobangla to replace contracted cargoes with spot-market purchases to keep gas flowing to power plants, industries and other consumers.
"The Iran war cost us an additional Tk10,600 crore as most long-term suppliers have maintained force majeure since March, forcing us to rely on expensive spot purchases," said AKM Mizanur Rahman, director (finance) of Petrobangla.
The disruption has fundamentally changed Bangladesh's LNG procurement mix.
Before the conflict, the country relied heavily on relatively predictable long-term supplies from Qatar and Oman.
With those supplies disrupted, Petrobangla had to repeatedly go to the spot market, where prices are determined by tight global supply and demand conditions.
The financial pressure has intensified as spot LNG prices have moved far above pre-war levels.
Before the conflict, Bangladesh generally bought spot LNG at around $10-$12 per MMBtu.
By August, some cargoes were being approved at more than $21-$22/MMBtu, while September cargoes were contracted at $24.25-$24.63/MMBtu.
More recent emergency purchases have crossed $26-$28/MMBtu, with some cargoes approaching $30/MMBtu.
Bangladesh has been among the countries seeking supplies from West Africa, Indonesia, North America and other regions as buyers diversify away from disrupted Middle Eastern supply routes.
The government had initially allocated Tk6,000 crore for LNG subsidies in FY2025-26, but the final requirement rose to Tk14,600 crore as the cost of emergency and spot purchases increased.
Subsidy pressure likely to remain
The current subsidy expenditure also highlights the widening mismatch between Bangladesh's LNG import cost and domestic gas pricing.
The per cubic metre blended gas price as of September stands at Tk46.40. But the average weighted sale price during July-September was Tk23.90.
The Tk22.50 per cubic metre gap has to be covered through the government's subsidy support to Petrobangla.
With international LNG prices still elevated and geopolitical risks continuing around the Middle East, the subsidy requirement could remain under pressure in the coming months.
The scale of spending is particularly striking because Tk10,300 crore has been disbursed in only three months – roughly 71% of the entire Tk14,600 crore LNG subsidy bill for FY2025-26.
Last year's subsidy had already risen sharply from the original allocation because of higher import costs and increased reliance on spot purchases.
The latest figures suggest that the fiscal pressure from LNG imports is no longer confined to an exceptional period during the initial supply shock; the higher cost of securing replacement cargoes is continuing into the current fiscal year.
Subsidy history
Petrobangla's data show that the government's LNG import subsidy has increased sharply since Bangladesh began importing LNG.
The subsidy stood at Tk2,500 crore in FY2018-19, rising to Tk3,600 crore in FY2019-20 and then falling to Tk2,400 crore in FY2020-21.
It increased significantly to Tk6,000 crore in FY2021-22, before reaching Tk6,365.12 crore in FY2022-23.
The subsidy stood at Tk6,000 crore in FY2023-24 and then rose to Tk8,900 crore in FY2024-25.
The amount surged further to Tk14,600 crore in FY2025-26.
Overall, the annual LNG subsidy increased by about 143% in just two years, from Tk6,000 crore in FY2023-24 to Tk14,600 crore in FY2025-26.
Supply crisis leaves little room to cut imports
Despite the higher prices, Petrobangla cannot simply reduce LNG imports without risking a further deterioration in gas supply.
Gas-fired power plants remain heavily dependent on imported LNG, while domestic gas production has been declining.
The government has therefore continued procuring cargoes even when spot prices have surged.
In July, Bangladesh imported 11 LNG cargoes, while procurement continued at a high level in August and September.
Officials said most of the cargoes were secured from the spot market to compensate for shortages in long-term and short-term supplies.
As a result, the government has effectively faced a choice between paying substantially more for LNG or reducing imports and risking lower gas supplies to power plants and industries.
Red Sea risks add another layer
The pressure has been compounded by growing security risks around the Bab el-Mandeb Strait, another major maritime chokepoint connecting the Red Sea with the Indian Ocean.
This strait carries 8% to 10% of Qatari LNG.
While the waterway has not been completely shut, vessel traffic has fallen amid renewed attacks and threats linked to the wider Middle East conflict.
The prospect of disruption has raised concerns over longer shipping routes, higher freight costs and tighter availability of energy cargoes.
For Bangladesh, the simultaneous disruption risks around Hormuz and Bab el-Mandeb are particularly significant because the country depends heavily on imported energy, said Petrobangla officials.
Any prolonged disruption can force LNG and other fuel suppliers to use longer routes, increasing freight, insurance and other logistics costs.
The threat around Bab el-Mandeb has added another layer of uncertainty to an LNG market that was already under pressure from the loss of contracted Middle Eastern supplies.
