Why Bangladesh needs to rethink its LNG dependence

Bangladesh is at a critical energy crossroads. Eight years after beginning LNG imports as a short-term measure, the country finds itself trapped in an expensive and volatile energy system that is straining its economy and its people.

When Bangladesh started importing LNG in 2018, the rationale was clear: industrial growth needed energy. If the country was to become a developed economy by 2041, energy shortages could not be allowed to hold back progress. LNG was presented as a temporary bridge. But eight years later, the bridge has become a permanent structure, and the toll is rising.

A heavy burden

The numbers tell a troubling story. Last fiscal year, Bangladesh imported 113 LNG cargoes at a cost of approximately Tk 59,713 crore, with the government providing an additional Tk 12,600 crore in subsidies. If international prices remain elevated, this year's bill alone could reach Tk 90,000 crore.

With two additional terminals being considered, annual import costs could soar to Tk 120,000–130,000 crore. Under adverse market conditions, the figure could climb even higher. The Institute for Energy Economics and Financial Analysis (IEEFA) has warned that Bangladesh's LNG import bill could hit US$8.5 billion by FY2029–30.

These are not abstract risks. Bangladesh has already experienced the volatility of the global LNG market first-hand. Spot prices that traded at around $10.72 per MMBtu in February recently climbed above $22. Two newly approved cargoes were priced above $24 per MMBtu.

The consequences extend far beyond power generation. According to a recent analysis by Zero Carbon Analytics, Bangladesh's fossil-fuel import bill could rise by as much as $2.8 billion, or roughly Tk 35,000 crore, in 2026 compared with 2025 if global prices remain at current levels. Even if LNG imports have declined during this period, the cost has increased dramatically.

This additional cost could widen the trade deficit, fuel inflation and put further pressure on the taka. Import cover could fall from 5.7 months to around 5.2 months. The impact on ordinary Bangladeshis is already visible in rising prices and shrinking purchasing power, with lower-income families falling below the poverty line.

Industries are suffering too. Six of the country's seven major fertiliser plants have reportedly been shut or forced to operate below capacity due to inadequate gas supplies. Production at some garment factories in Savar, Ashulia and Dhamrai has fallen by 15–20 percent.

The vulnerability of LNG dependence

An LNG-heavy energy strategy carries fundamental weaknesses: Bangladesh has no control over the prices it pays, the geopolitical conditions that determine supply, or the international shipping routes through which that supply arrives. The recent disruption around the Strait of Hormuz has made that vulnerability particularly clear.

Even long-term contracts do not eliminate this risk. Bangladesh has signed a deal to purchase 117 LNG cargoes from the United States between 2026 and 2038. Yet recent events have shown that even contracted supplies can be disrupted – three major suppliers have reportedly invoked force majeure during the current crisis. A contract can secure a commercial relationship. It cannot guarantee geopolitical stability.

The missing domestic alternative

There is a legitimate argument for LNG. Bangladesh has a real gas shortage. Industries need gas. Power plants need gas. Fertiliser production needs gas. In the short term, LNG imports may therefore be unavoidable.

But short-term necessity cannot automatically become a long-term strategy. The more important question is why domestic gas exploration has not progressed with the same urgency as LNG procurement.

In 2024, a plan was adopted to drill 100 wells by 2028. Yet, after more than six months of the current government's tenure, only one new project involving three wells has received approval.

Petrobangla is now considering a target of drilling 150 wells by 2031. If implemented seriously, this could help reduce dependence on imports. But the credibility of the target will depend not on announcements but on whether drilling actually accelerates and continues consistently.

Bangladesh has repeatedly suffered from a stop-start approach to domestic exploration. When shortages become severe, the country turns to expensive imports. When the immediate crisis eases, exploration loses urgency. That cycle needs to end.

A more rigorous assessment needed

Before committing billions of dollars to new LNG infrastructure, policymakers should answer some basic questions: How large will Bangladesh's gas deficit actually be over the next five, 10 and 15 years? How much domestic gas can realistically be produced? What will happen to the country's foreign-exchange reserves if LNG prices remain high for several years? And, most importantly, will these terminals strengthen energy security, or simply make the country more dependent on imported energy for decades?

An alternative path

Bangladesh does have alternatives. Domestic gas exploration must be accelerated. Existing wells should be worked over. Gas from promising fields – including Bhola – should be brought into the national grid.

At the same time, Bangladesh should treat rooftop solar, battery storage and cross-border hydropower as components of energy security, not merely as climate policy. IEEFA estimates that every 1 MW of rooftop solar can save roughly US$180,000 a year in imported fuel costs.

The comparison is revealing: the additional amount Bangladesh may spend on fossil-fuel imports this year could finance around 8 GW of rooftop solar capacity – equivalent to roughly a quarter of the country's existing power-generation capacity.

Bangladesh needs to add around 760 MW of renewable capacity annually to meet its target of generating 20 percent of electricity from renewable sources by 2030. Yet renewable projects under construction amount to only about 358 MW. The gap between ambition and implementation is enormous.

The government has inherited a problem accumulated over many years. It cannot realistically solve it overnight. In the short term, continuing some LNG imports to keep industries and households supplied makes sense.

But that necessity should not become an argument for building more LNG infrastructure. If Bangladesh is already struggling with the pressure of importing 1,100 million cubic feet of LNG per day, there must be a thorough assessment of how the economy would cope if import capacity were doubled.

Energy security is more than having gas. It is about sustainable, affordable and reliable supply. Bangladesh's future depends on making the right choice – before the cost of the wrong one becomes too high to bear.

Ashraful Islam Raana is working at an international development organisation.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views and opinions of The Business Standard.