Written by: Karim Hammam
Bangladesh's energy sector is facing a critical juncture that poses severe structural challenges for the country, as excessive reliance on imported liquefied natural gas (LNG) has led to significant financial pressures, in addition to a decline in the performance of many industrial sectors due to supply shortages. These challenges have prompted the government to suspend the issuance of gas connection licenses for new industrial facilities, amidst demands to reform national energy strategies to cope with global fluctuations.
Repercussions of the Financial Crisis and Burdens of Imported Gas
Estimates indicate that Bangladesh may bear additional costs of up to $1.09 billion (about 134 billion taka) to cover its LNG needs during the period from August to October 2026. This crisis is mainly due to the invocation of force majeure clauses by suppliers due to regional crises in West Asia, forcing the country to shift towards the more expensive spot gas market instead of relying on long-term contracts.
The power generation system is facing increasing pressures; the electricity sector currently receives gas at a subsidized price of 15.5 taka per cubic meter. If the government decides to raise this price to 25 taka, the cost of electricity production in combined-cycle plants will experience a sharp increase, which will necessarily impose an adjustment in the final electricity tariff for consumers, reflecting the fragility of the Bangladeshi economy's reliance on imported gas.
The Necessity of Transitioning to a Sustainable Energy Model
In light of supply shortages, local industries have turned to unregulated alternative solutions, such as using liquefied petroleum gas (LPG) and diesel, or investing in biomass boilers, but these solutions still lack sustainable supply chains. Experts emphasize the need to design an evidence-based energy path that takes into account demand fluctuations and future risks, with a focus on reducing LNG dependency.
The proposed path includes enhancing cross-border electricity interconnection, particularly with Nepal and Bhutan, and utilizing renewable energy markets. Furthermore, the transition to energy-efficient technologies, such as electric heat pumps in the textile sector, and the growing reliance on solar energy represent a fundamental pillar for Bangladesh's energy future. The government aims to add more than 4,500 megawatts of utility-scale renewable energy by 2030, which requires a parallel transformation in industrial infrastructure to enhance reliance on electricity rather than gas.
