LNG subsidy allocation exhausted in first three months amid crisis, plan to import 115 cargoes in 2027

Bangladesh has fallen into a severe gas crisis this year as liquefied natural gas (LNG) supply has been disrupted by the war in the Middle East.

With LNG supply under long-term contracts with Qatar and Oman stopped, the government has had to rely on the spot market to meet demand.

Alongside higher import costs, the entire subsidy allocated for LNG imports in the current fiscal year has been exhausted in the first three months. That has created fresh concern about keeping gas supply normal and managing the extra import cost ahead.

Considering normal demand, the government has planned to import a total of 115 LNG cargoes in 2027. Of those, the target is to import 103 cargoes under long-term and short-term contracts.

Of those cargoes, 40 are due to come from Qatar. Supply from Oman, however, is still uncertain. There is therefore doubt about ensuring the scheduled supply. In this situation, Petrobangla is looking for ways to import LNG from alternative sources to deal with a possible crisis.

If LNG prices rise on the international market, Bangladesh's energy situation could become more complicated. Buying gas at higher prices from the spot market in particular would increase both import costs and pressure on government subsidies.

The impact could fall on electricity generation, factories and gas supply to the residential sector. If the price of LNG exceeds 80 taka per cubic metre, using the gas will become expensive for factories as well as residential customers. Industrial production could be disrupted, and running captive power generation and factory boilers could also become difficult.

There is a risk that demand for LNG on the international market will rise in the next few months. If weather causes fuel use to increase in different countries, competition among importing countries could intensify. If Middle East supply uncertainty is added to that, there is a risk LNG prices will rise further.

In such a situation, the price per unit of LNG could reach 40 to 50 dollars, as it did last time. In that case, importing one LNG cargo could cost 2,000 crore to 3,000 crore taka.

Previously, under the government's G2G contracts with Oman, Qatar and Accelerate Energy, the LNG price was set by adding 0.5 dollars to 10 percent of the Brent price. Under that method, the price per unit of LNG was 8 to 9 dollars.

Now, however, the Japan-Korea Marker (JKM) price index is being followed even for G2G contracts. The LNG price on that index is currently 19 dollars. If it reaches 50 dollars in future, Bangladesh could have to buy LNG at that same high price.

In this situation, relying only on the spot market to meet gas demand could become risky in the long term. When prices rise on the international market, import costs increase quickly, creating extra pressure on the government's subsidy management and on foreign currency. At the same time, if a supply crisis appears, there is a risk that electricity generation and factory activity will be disrupted.