Bangladesh’s LNG Dilemma: Balancing Energy Security, Import Costs and Economic Sustainability

Bangladesh is approaching a critical turning point in its energy journey. Declining domestic natural gas production, rising industrial demand and growing dependence on imported liquefied natural gas (LNG) have made energy security a major economic challenge. Although expanding LNG infrastructure may ease shortages, it could also increase pressure on foreign exchange reserves, public finances and industrial competitiveness.

The government plans to add 1,600 million cubic feet per day (mmcfd) of LNG regasification capacity by 2030, including a 600 mmcfd floating storage and regasification unit (FSRU) at Moheshkhali by 2028 and a 1,000 mmcfd land-based terminal at Matarbari by 2030. However, the purchase committee returned a proposal for a third floating terminal for further review on October 15, and the government subsequently withdrew a proposed Tk13,161 crore LNG terminal deal with China's CNEE. Nevertheless, plans for additional terminals continue alongside efforts to drill 150 domestic gas wells.

Bangladesh currently operates two FSRUs with a combined regasification capacity of approximately 1,100 mmcfd, against daily gas demand of around 3,800 mmcfd. A disruption at an Excelerate-operated Moheshkhali terminal in July 2026 reduced supply to the national grid by approximately 450 mmcfd, affecting industries, power plants and transport services. This exposed the vulnerability of an energy system dependent on limited import infrastructure.

Bangladesh needs a clear energy hierarchy: maximise viable domestic production, accelerate renewable energy, improve efficiency, diversify LNG procurement and reserve imported gas for uses with limited practical alternatives.

The foreign exchange burden is an equally serious concern. Bangladesh spent approximately $3.8 billion on LNG imports in 2025, up from $3 billion in 2024. LNG accounts for roughly one-fourth of the country's gas supply. Beyond construction and financing, expanded capacity requires continuous spending on LNG cargoes, shipping and regasification. International price fluctuations, geopolitical tensions and shipping disruptions can further increase costs. Consequently, Bangladesh must choose between raising tariffs, increasing subsidies, passing higher costs on to industries and consumers, or tolerating shortages. Each option carries economic consequences, while excessive import dependence could weaken foreign exchange stability.

Reliable and affordable gas is essential for manufacturing, particularly textiles, garments, fertiliser, ceramics, steel and glass. Insufficient supply reduces factory utilisation, disrupts production and discourages investment. Meanwhile, expensive LNG raises electricity generation and industrial costs, potentially contributing to inflation and weakening export competitiveness. The July disruption demonstrated how a technical problem at one facility can affect the wider economy. LNG expansion is therefore a macroeconomic policy decision, not merely an infrastructure project.

Bangladesh should accelerate commercially viable onshore and offshore gas exploration through transparent bidding, credible geological assessments and incentives for qualified investors. Although new discoveries will not immediately eliminate import dependence, they could reduce import expenditure and strengthen supply resilience. Existing fields also require better maintenance, recovery techniques and production infrastructure. Domestic resources must be managed efficiently to extend their economic value.

Solar power deserves a stronger role in the energy strategy. Rooftop installations at garment factories, industrial facilities, commercial buildings and public institutions could reduce reliance on gas-fired electricity and imported fuels. Energy efficiency is equally important. Modernising industrial boilers, upgrading machinery, reducing transmission and distribution losses, and requiring energy audits for large consumers could lower demand without compromising production. Incentives and accessible financing should encourage businesses to adopt efficient equipment and renewable energy.

Bangladesh should not abandon LNG, as imported gas will remain necessary amid declining domestic production and existing shortages. However, every proposed terminal needs a comprehensive cost-benefit assessment covering construction, financing, operating expenses, LNG procurement, foreign exchange exposure, contractual obligations and potential subsidies. Independent assessments should establish whether projected demand justifies additional capacity and whether alternative investments offer better returns. Procurement should balance long-term contracts with carefully managed spot purchases. Diversifying suppliers, strengthening contractual safeguards and preparing contingency arrangements would reduce exposure to supply disruptions and prevent costly unused capacity.

Bangladesh needs a clear energy hierarchy: maximise viable domestic production, accelerate renewable energy, improve efficiency, diversify LNG procurement and reserve imported gas for uses with limited practical alternatives. Additional terminals may ease shortages, but capacity alone cannot guarantee affordable energy. Ultimately, industrial competitiveness, household affordability and foreign exchange stability will depend on reliable supplies at predictable prices. The objective should not be to build more LNG terminals at any cost, but to develop a diversified and financially sustainable energy system that supports industrialisation, protects consumers and strengthens long-term economic security.