Bangladesh must learn the hard lessons of energy security
Bangladesh’s heavy reliance on imported fuel and shipping routes through the Strait of Hormuz leaves the economy dangerously exposed to geopolitical shocks. Without diversifying supply and investing in long-term energy security, the next global crisis could prove far more costly
I say this with some embarrassment: Bangladesh appears not to have learned sufficiently from the global energy shock that followed the Russian invasion of Ukraine.
That war exposed the fragility of global energy supply chains and the devastating consequences of sudden price spikes. Many countries moved swiftly to diversify suppliers, secure long-term contracts, and invest in energy infrastructure.
Bangladesh, unfortunately, seems to have done too little.
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There appears to be limited institutional memory within key agencies such as Bangladesh Petroleum Corporation and Petrobangla, and insufficient coordination between successive governments. The energy sector demands continuity, long-term planning, and strategic foresight. Without those, vulnerabilities accumulate.
Today, Bangladesh faces precisely such vulnerabilities.
The energy cost shock ahead
Bangladesh relies heavily on imported energy.
Nearly 100% of its fuel oil requirements are imported, mostly from Middle Eastern producers such as Saudi Arabia and the United Arab Emirates.
The country imports more than six million tonnes of petroleum products annually, costing roughly US$1 billion, and a significant portion of these shipments travel through the Strait of Hormuz.
On the gas side, Bangladesh imports about five to six million tonnes of LNG annually, mainly from Qatar and Oman.
Imported LNG now supplies around 30–35% of Bangladesh's gas demand, making it indispensable for power generation and industry.
If global energy prices remain indexed to Brent Crude around the current range of $80–85 per barrel, Bangladesh's energy import bill in 2026 could increase substantially. Even a $10 increase in oil prices alone can add roughly $80 million to the monthly import bill, according to analysts.
Over a year, this could translate into an additional $900 million to $1 billion in costs, depending on price volatility and LNG spot purchases.
The immediate question, therefore, becomes: how will Bangladesh finance this rising energy bill?
But an even more critical question arises.
Will Bangladesh even have access to physical molecules if geopolitical tensions escalate?
The Hormuz vulnerability
A central risk lies in Bangladesh's extreme reliance on energy routes through the Strait of Hormuz.
More than 70% of LNG imports to South Asian countries, including Bangladesh, pass through this chokepoint, making them highly exposed to disruptions.
Globally, the strait carries around 20 per cent of the world's LNG trade and roughly a third of seaborne crude oil shipments.
If the strait were disrupted even temporarily, the consequences for Bangladesh would be severe:
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Up to 70% of the LNG supply could be disrupted
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A large portion of imported petroleum products could be delayed or halted
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Spot LNG prices could surge dramatically as Asian buyers compete for limited cargoes
In such a scenario, Bangladesh could face both higher prices and physical shortages.
Energy security, therefore, is not merely about affordability; it is about guaranteed access to supply.
A strategic opportunity lost
One of the most troubling developments in recent years has been the cancellation of a much-needed LNG infrastructure project proposed by Summit Group.
The project included an additional floating LNG terminal and long-term LNG supply sourced from outside the Gulf region. This would have diversified Bangladesh's supply chain and reduced dependence on the Strait of Hormuz route.
Instead, the project was cancelled.
The decision reflected not only non-adherence to contractual commitments but also a deeper misunderstanding of energy security. The interim government's focus on vilification rather than strategic risk management has had consequences.
The cost of that decision runs into billions of dollars in lost opportunity and increased vulnerability.
The way forward
Energy security cannot be built on short-term thinking. It requires hedging risks, even at a premium.
Several fundamentals should guide Bangladesh's strategy.
1. Diversify supply sources geographically.
LNG should come not only from the Gulf but also from the United States, Africa, and other emerging exporters.
2. Invest in upstream energy production abroad.
Equity stakes in overseas gas and oil fields can secure long-term supply on a cost-plus basis.
3. Invest in transportation capacity.
Ownership or strategic participation in oil tankers and LNG carriers would strengthen supply control.
4. Encourage private sector and foreign investment.
Allowing private companies, including foreign direct investors, to build infrastructure ensures that global stakeholders have a vested interest in Bangladesh's energy security.
Energy security is national security
Bangladesh's economic growth over the past two decades has depended heavily on reliable energy.
Protecting that growth requires long-term thinking, respect for contracts, diversified supply chains, and strong partnerships with global energy players.
The world has already learned these lessons through painful crises.
Bangladesh must learn them too, before the next shock arrives.
Muhammed Aziz Khan is the Chairman of Summit Group.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.
