Petrobangla plans fresh gas price hike

Petrobangla is preparing to seek another increase in gas prices, targeting gas supplied to power plants and compressed natural gas (CNG) used in vehicles, as the state-owned energy unit moves to reduce its deficit amid soaring import costs and widening financial losses.

The proposal also includes raising the distribution margins of gas distribution companies as they say their current charges are insufficient to cover operating costs.

*    Gas prices for power, CNG to rise
*    Distributors seek higher margins
*    Petrobangla deficit hits Tk 16,500cr

The last price hike was made in April, 2025 (raising industrial gas tariff from Tk 30 to Tk 40 per cubic meter. Again in November last year the price of fertilizer production gas was raised from Tk. 16 to Tk. 29.25 per cubic meter.

Petrobangla has already begun collecting financial and operational data from gas distribution companies before forwarding a proposal to the Energy Ministry. Following the ministry's approval, the proposal will be submitted to the Bangladesh Energy Regulatory Commission (BERC) for consideration.

"We have requested information from various distribution companies. Data from some companies has already arrived. After reviewing the overall situation, we will forward it to the ministry for their opinion. Once we receive ministry approval, the proposal will be sent to the Bangladesh Energy Regulatory Commission," a Petrobangla official told the Daily Observer, requesting anonymity.

"We don't want to make a profit, but we also don't want to incur losses. We want to phase out subsidies. Primarily, increasing the price of gas used in vehicles and power generation is under active consideration. The rest depends on the ministry's policy decisions," the official said.

According to Petrobangla's calculations for fiscal year 2025-26, the average purchase cost of gas from domestic and imported sources stood at Tk 31.65 per cubic metre, while the average selling price remained Tk 23.63, creating a deficit of Tk 8.02 per cubic metre.

However, the sharp rise in global energy prices following the Iran conflict and disruptions around the Strait of Hormuz significantly increased import costs. Between January and March 2026, the average purchase price was Tk 27.64 per cubic metre, but it jumped to Tk 45.79 during April-June after the conflict escalated. Selling gas at an unchanged average price resulted in a loss of Tk 21.82 per cubic metre during the period.

As a result, Petrobangla's overall deficit for FY2025-26 is estimated at nearly Tk 16,500 crore, while the government provided Tk 14,600 crore in subsidies.

Besides importing liquefied natural gas (LNG), Petrobangla purchases gas from multinational companies and three state-owned producers. Domestic gas remains significantly cheaper than imported LNG, but declining local production has steadily increased the country's reliance on imports. Domestic gas production has fallen to around 1,650 million cubic feet per day from about 2,800 million cubic feet previously. During the last fiscal year, around 30 per cent of the country's gas supply came from imported LNG, while 70 per cent was produced locally.

Petrobangla projects that by 2030, domestic production will account for only 30 per cent of total supply, with imported LNG rising to 70 per cent, a shift that could place further upward pressure on gas prices.

The average cost of domestically produced gas is about Tk 6.07 per cubic metre, but blending it with imported LNG raises the average purchase price to between Tk 31.65 and Tk 45.79 per cubic metre. Industry insiders say inadequate gas exploration has contributed significantly to the country's growing dependence on costly imports. Although the 1995 Energy Policy called for drilling four exploration wells annually, successive governments failed to meet that target, leading to declining reserves, suspension of most new gas connections and persistent supply shortages affecting industries and power plants.

Meanwhile, several gas distribution companies, including Titas Gas Transmission and Distribution PLC, Pashchimanchal Gas Company Limited, Jalalabad Gas Transmission and Distribution System Limited, Bakhrabad Gas Distribution Company, Karnaphuli Gas Distribution Company Limited and Sundarban Gas Company Limited, have sought higher distribution margins.

According to Petrobangla officials, several proposals, including one from Karnaphuli Gas Distribution Company Limited, have already been submitted, with the companies arguing that existing distribution charges no longer cover their operating expenses.