More LNG is not the answer to Bangladesh's energy crisis

The technical faults in one of the country’s two floating storage and regasification units (FSRUs) on 21 July have had a cascading effect on various sectors of the economy. The suspension of loading of liquefied natural gas (LNG) to the second FSRU on 13 August due to inclement weather further worsened the gas supply situation. These two events compounded the problems of the energy sector at a time when the country’s normal gas demand-supply gap has already surpassed 1,300 million cubic feet per day (MMcfd). As natural gas contributes to around 40% of Bangladesh’s annual power generation, load shedding frequently surpassed 3 gigawatts (GW) between 26 July and 15 August 2026.

Natural gas also powers captive generators and boilers for industries. The recent supply disruptions have thus prompted industry and power sector stakeholders to urge the government to build additional infrastructure for FSRUs and a land-based LNG terminal. Some stakeholders believe the country can cope with the high cost of LNG imports by raising power tariffs.

As tariff adjustment is unlikely to eliminate the fiscal pressure from LNG imports, exploring local and regional energy solutions and reducing demand for imported fossil fuels would prove to be a much better solution for the country.

Bangladesh’s high exposure to the international fuel market

The Institute for Energy Economics and Financial Analysis (IEEFA) estimated that Bangladesh’s import dependence in the energy sector, excluding biomass, reached 62.5% in 2025. Further analysis concludes that the country relies on the international energy market for 59.5% of its energy supply (Note: Cross-border electricity imports contribute to 3%).

Now that the government intends to build two new FSRUs and a land-based LNG terminal to meet future demand, Bangladesh’s primary energy mix could face a major shift. Post 2030, LNG contribution to annual gas consumption could exceed 60% compared to around 33% in 2025. IEEFA also forecasts that Bangladesh’s exposure to the international fossil fuel market could rise to around 74% from 59.5% over the same period. These projections consider the government’s goal of adding 10.45GW of renewable energy by 2030, the optimal utilisation of future nuclear plants, and a modest demand growth for liquefied petroleum gas (LPG) and coal. 

Increased LNG dependence is not a solution

In 2025, Bangladesh spent around USD3.8 billion (BDT403 billion) to import 327.8 billion cubic feet (Bcf) of LNG for an average of around USD12/million British thermal units (MMBtu) (using BP’s approximate conversion factors). Excluding regasification and terminal charges, the import cost of LNG was over BDT50/cubic metre (m3) (USD0.41/m3) in 2025. Yet, industries paid BDT30/m3 (USD0.25/m3) and BDT31.5/m3 (USD0.26/m3) for their processes and captive generators, respectively, due to a higher share of domestic gas in overall consumption (domestic gas production costs just over BDT12/m3). If new terminals come online, LNG will likely have a major share in the country’s total gas consumption, creating a case for raising gas tariffs. 

Post 2030, LNG imports could rise to 730Bcf, which would be a capacity utilisation of 65% of all terminals. A gas price of USD12/MMBtu will cost the country USD8.5 billion (BDT1,044 billion) per annum. An uncertain global energy market could increase import bills to USD14 billion (BDT1,719 billion), considering an average price of USD20/MMBtu.

Since Bangladesh relies on payment guarantees and loans by international agencies to import LNG, a demand surge may require additional loans/support from various agencies, which raises questions on the feasibility of expanding LNG capacity. Alternatively, the unaffordability of LNG may result in subdued capacity utilisation of new terminals. 

Revisiting cost assumptions

Private power producers and businesses feel that Bangladesh’s household power tariffs are significantly lower than those of other countries, providing room for increasing prices to accommodate more LNG.

However, according to IEEFA’s analysis a household in Delhi pays INR4,140 (USD43.3) monthly for 630 kilowatt-hour (kWh) as the government offers free electricity of up to 200kWh. On the other hand, a Bangladeshi household incurs around BDT7,200 (USD59) for similar consumption. A closer inspection shows that Delhi households pay INR8/kWh (USD0.084/kWh) for any energy consumption beyond 1,200kWh, while their Bangladeshi counterparts are charged BDT17.35/kWh (USD0.14/kWh) for units above 800kWh. Although Delhi’s electricity tariffs include higher surcharges and duties than Bangladesh’s, electricity is comparatively more expensive in Bangladesh.

On the industrial side, before the latest June 2026 price hikes, Bangladesh’s industries paid tariffs comparable to their Vietnamese peers. However, increasing tariffs due to imported LNG will affect the competitiveness of Bangladesh’s export-oriented industries in the international market. 

Besides, an assessment of financial year (FY) 2024–25 data shows that the generation cost of grid-based power, excluding gas-based plants, was over BDT15.5/kWh (USD0.13/kWh) against the average generation cost of BDT12.1/kWh (USD0.098/kWh). If Bangladesh factors in the cost of imported LNG (for example, BDT50/m3), the fuel cost in gas-based plants will rise by over BDT6/kWh (USD0.049/kWh), resulting in average revenue shortfall in grid power of up to BDT7.7/kWh (USD0.063/kWh) from around BDT4.1/kWh (USD0.034/kWh). Even after an increase of over 40% in bulk tariff, the revenue shortfall will still hover around BDT500 billion (USD4.1 billion).

Solutions lie closer to home

Reducing Bangladesh’s heavy reliance on gas requires careful transition planning, blending multiple country-level and regional solutions. For example, a combination of domestic gas and cross-border hydropower could drastically reduce the demand for imported LNG. Accelerated renewable energy deployment, battery energy storage systems (BESS), reduced system losses in the gas transmission and distribution network, demand-side energy efficiency measures, and technological shifts will further reduce LNG demand. Solar-powered charging stations could minimise the power demand created by electric three-wheelers from midnight to early morning, limiting the demand for gas further.

Bangladesh’s efforts over the next four to five years will define how it will navigate its energy sector challenges, and solutions such as the ones above can potentially shield it from an uncertain global fossil fuel market.

This article was first published in The Daily Star