Bangladesh’s energy crunch: Big plans, tougher reality

Bangladesh's energy challenge is no longer simply about keeping factories running or keeping the lights on. It is increasingly a question of economic competitiveness, foreign-exchange management, investment and industrial growth.

Natural gas remains at the centre of this challenge. It is the principal fuel for much of the country's power generation and an essential input for industries, particularly textiles, garments, fertiliser, ceramics and other manufacturing sectors. When gas supply becomes unreliable, production falls, costs rise and export competitiveness suffers.

The scale of the problem is clear. Bangladesh's approved gas demand is around 3,800 million cubic feet per day (mmcfd), while recent supply has remained substantially below that level. On September 15, total supply reached about 2,610 mmcfd, including 1,620 mmcfd from domestic fields and 990 mmcfd of imported LNG.

The recent disruption at an LNG terminal demonstrated how vulnerable the economy has become to imported energy and infrastructure interruptions. LNG is necessary for Bangladesh in the near term, but it cannot by itself provide long-term energy security. Global LNG prices, geopolitical tensions, shipping disruptions and foreign-exchange availability can all affect the cost and reliability of imported gas.

That vulnerability is particularly important for an economy competing for international manufacturing investment. Energy shortages can mean cancelled production schedules, delayed exports and higher operating costs. Energy security, therefore, is directly connected to Bangladesh's investment climate.

Domestic gas must come first

Bangladesh still has a valuable domestic resource base. According to information presented in Parliament, the country had 7.63 trillion cubic feet (TCF) of recoverable gas reserves as of 1 January 2026. But the important question is not simply how much gas remains underground; it is how quickly and efficiently Bangladesh can bring commercially recoverable gas to the market.

This requires greater attention to existing fields.

The fastest and potentially lowest-cost additional gas may not always come from a new discovery. It can come from maximising recovery from existing fields, accelerating compression projects, drilling appraisal and development wells, repairing declining wells and applying enhanced recovery techniques.

The government's 150-well drilling and workover programme is therefore important. By early September, 30 wells had been completed, adding about 100 mmcfd to the national grid, while further wells are expected to add additional production.

The principle is simple: the cheapest gas molecule is often the one already discovered but not yet fully recovered.

Exploration needs international capital

New exploration remains essential, particularly offshore. Bangladesh has launched an international bidding round covering 26 offshore blocks — 11 shallow-water and 15 deep-water blocks — under revised production-sharing arrangements.

But announcing blocks is not the same as attracting investment.

Bangladesh needs international oil companies with capital, technology, advanced seismic capability and offshore operating experience. That means competitive production-sharing contracts, predictable fiscal terms, contract stability, rapid approvals, transparent regulation and efficient access to geological data.

The real test of the offshore programme will therefore not be the number of blocks offered, but whether credible international operators commit substantial capital and successfully convert exploration prospects into commercial production.

Policy certainty is as important as geological potential.

LNG: Necessary, but not the whole answer

Bangladesh should continue developing LNG infrastructure because imported gas will remain part of the energy mix. Additional regasification capacity can provide flexibility during domestic shortages.

But LNG should be treated as a strategic supplement, not a substitute for domestic exploration.

The recent supply disruption showed the risks clearly. Bangladesh needs diversified LNG suppliers, adequate storage and regasification capacity, and contingency arrangements. But every additional dollar spent on imported gas also increases exposure to international prices and foreign-exchange pressures.

The strategic objective should therefore be to use LNG prudently while accelerating domestic production.

Save energy before buying more

Energy policy is often discussed as a supply problem. It is also a demand problem.

Industrial energy efficiency, modern equipment, waste-heat recovery, efficient boilers and captive power systems can reduce gas consumption without reducing production. Better power-generation efficiency and lower system losses can similarly reduce the amount of fuel required to deliver each unit of electricity.

Every unit of energy saved means less LNG, fuel, or electricity needs to be imported.

Demand-side management should therefore become a formal component of Bangladesh's energy strategy — not merely an emergency response when shortages occur.

Renewables and regional power trade

Renewable energy also has an important role, although it cannot immediately replace natural gas.

Bangladesh's Renewable Energy Policy 2025 targets meeting 20% of power demand from renewable sources by 2030 and 30% by 2040. Achieving these targets will require investment in transmission, storage, land-efficient solar solutions, financing mechanisms and commercially workable wheeling arrangements.

Regional electricity trade can provide another layer of diversification. Bangladesh already imports electricity from neighbouring countries, while cross-border trade can potentially expand through regional transmission networks and additional hydropower imports.

A diversified regional energy market could complement domestic gas, LNG and renewable generation rather than replacing any single source.

Refining and import diversification

Energy security also extends beyond gas and electricity. Bangladesh remains heavily dependent on imported refined petroleum products.

The expansion of Eastern Refinery is therefore strategically significant. The ERL-2 project is expected to increase refining capacity from 1.5 million tonnes to 4.5 million tonnes annually, reducing dependence on imported refined fuel. The government signed a roughly $1 billion Islamic Development Bank financing agreement in September, with completion targeted for 2030.

This illustrates an important principle: energy security requires a portfolio — not dependence on a single fuel or technology.

From plans to production

Bangladesh now has many energy plans: domestic drilling, offshore exploration, LNG expansion, renewable energy, grid modernisation, regional electricity imports and refinery expansion.

The harder task is execution.

For domestic gas, the priority should be to maximise production from existing fields while accelerating new exploration. For offshore development, Bangladesh must create conditions that attract serious international investors. For LNG, it should diversify suppliers and manage import exposure. For renewables, it must address grid and financing constraints. For industries, energy efficiency should become part of competitiveness policy.

The strategic choice is therefore not between domestic gas, LNG, renewables or imported electricity. Bangladesh needs all of them –but in a balanced system that maximises domestic resources and prudently manages import dependence.

The country's energy challenge is ultimately a national economic challenge. Rising dependence on imported energy puts pressure on foreign-exchange reserves, public finances, production costs and investment decisions. Reliable domestic energy, by contrast, strengthens industrial competitiveness and creates the foundation for sustained growth.

The success of Bangladesh's energy strategy should not be measured by the number of plans announced, wells proposed, LNG terminals approved or megawatts installed. It should be measured by whether industries and households receive reliable and affordable energy, whether domestic resources are developed efficiently, and whether the country can reduce unnecessary exposure to volatile international energy markets.

Energy security is not simply about keeping the lights on. It is about protecting Bangladesh's industrial future, attracting investment, creating employment and sustaining economic prosperity.

For Bangladesh, the most economically valuable energy molecule remains domestic natural gas. Accelerating its exploration, recovery and commercial production should therefore be treated not merely as an energy-sector priority, but as a national economic priority.

Sketch: TBS

Syed Ershad Ahmed is the former president of the Foreign Investors Chamber of Commerce and Industry (FICCI) and the American Chamber of Commerce in Bangladesh (AmCham).