Reliance on LNG Sparks Bangladesh’s Energy Crisis, Hitting Factories, Exports

Bangladesh’s textile heartland is sounding a dire alarm as the deepening energy crisis in Bangladesh threatens to unravel the nation’s export engine. Four years after the 2022 global energy shock, the country finds itself least prepared to cushion the disaster currently unfolding in its power and energy sector, a predictable outcome of years of neglect in developing a credible long-term energy policy. Instead of reducing dependence on imported fuel, Bangladesh has structurally increased its reliance on liquefied natural gas (LNG) and other fossil fuels. Now, with geopolitical tensions disrupting supply chains and spot prices soaring, the consequences are visible across industry, exports and public finance.

Bangladesh’s Textile Sector is Losing Productivity Due to Load Shedding

Bangladesh’s textile sector is losing productivity as relentless load shedding is driving an estimated 20% drop in industrial output. Mohammad Hatem, President of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), warned that factories are losing critical hours every shift, expressing deep concern that the power situation has reached a critical threshold before the summer peak even hits. The crisis is actively disrupting factory floors, such as NZ Apparels in Narayanganj. Chairman Md Saleuddin Zaman Khan noted his facility is receiving 25% less gas than required. With unpredictable blackouts sometimes stretching up to five hours, Khan cautioned that increasingly anxious international buyers are actively questioning whether to shift their production to China.

To mitigate the crisis, NZ Apparels has turned to alternative energy solutions, including biomass boilers, LPG, and rooftop solar power. Currently, 9 MW of solar capacity is operational, with another 20 MW expected within 18 months. What a single textile company could implement relatively quickly remains beyond the grasp of the state. Bangladesh’s solar capacity still hovers around just over 1 GW, while renewables contribute only a marginal share of total electricity.

The industrial strain is already reflecting on the nation’s balance sheet. In March 2026, Bangladesh earned US$3.48 billion from exports, compared to US$4.28 billion in March 2025 — an 18% year-on-year decline, marking eight consecutive months of negative merchandise export growth. Hatem warned that without a stable supply of gas and electricity, the downward trend could accelerate as the summer peak approaches.

LNG Imports and the Energy Sector

According to Petrobangla and the Energy and Mineral Resources Division (EMRD), Bangladesh’s domestic gas fields are producing around 1,700–1,800 million cubic feet (mmcf) per day, down from about 2,500 mmcf in 2018. When imported LNG is included, the total daily supply stands at roughly 2,650 mmcf, of which 1,698 mmcf comes from local sources and 952 mmcf from imported LNG. Actual demand now exceeds 4,000 mmcf, creating a daily shortfall of about 1,350–1,400 mmcf. 

The drop in domestic gas production is the direct result of chronic underinvestment and policy neglect. Instead of financing local exploration, the state actively cannibalised its own upstream sector. Authorities systematically drained the Gas Development Fund (GDF)—a consumer-financed capital pool legally ring-fenced for the state exploration company, BAPEX. In 2022 alone, Tk 20 billion in loans was taken from the GDF solely to subsidise expensive spot-market LNG imports.

To meet April’s demand, nine LNG cargoes are planned for import. However, long-term contracts have been disrupted, and Bangladesh increasingly relies on the volatile spot market, where prices recently exceeded US$21 per MMBtu — nearly double the cost of long-term agreements.

Gas Crisis Due to War in Middle East Threatens Food Security

The impact is not limited to the textile and power sectors. Five of the country’s six fertiliser factories have been shut since March due to gas shortages, raising concerns about food security as farmers face delays in obtaining essential crop inputs. The standoff has created a ‘double whammy’ for the economy: the government is spending more foreign exchange on importing expensive ready-made fertilisers, while the domestic industry is suffering from a shortage of the raw materials it needs. Since LNG is being used in the power sector, this disruption in the fertiliser supply chain highlights how the ‘LNG-first’ policy is becoming a risk to national stability and long-term food security.

Renewable Energy vs LNG: South Asia’s Shifting Energy Landscape

Pakistan shows how fast solar can replace expensive gas. Its distributed solar capacity hit 34,000 MW in 2025, cutting grid demand by 11% compared to 2022. This surge led to a 15.4% decline in Pakistan’s LNG demand in 2025, as rooftop solar is cheaper and insulates the country from fossil fuel price volatility. Meanwhile, India’s gas share fell from 10% in 2013 to 7% in 2024, as coal and renewables dominate. With India’s solar reaching 143,603 MW and wind at 55,132 MW, renewables are proving to be a scalable, lower-cost alternative to LNG across the region. While Pakistan and India scale up solar to lower costs, Bangladesh remains trapped by high import costs. The rising cost of the energy sector amid the Gulf crisis is weighing on the budget, with Petrobangla seeking a 45 billion Taka ($370 million) subsidy to cover April’s LNG import bill alone. This reliance on high-cost, subsidised gas highlights the urgent need for a shift toward renewables. Without abandoning the ‘LNG-first’ policy, the country faces a cycle of rising debt and volatile fuel prices that threatens national stability.

IEEFA’s lead energy analyst for Bangladesh, Shafiqul Alam, said, “The energy supply disruption triggered by the Middle East crisis appears to be an even greater energy security problem than the 1970s oil crisis. While the energy crisis of the 1970s reportedly reduced global oil supply by 5 to 7%, the Middle East crisis has already shrunk both oil and LNG supplies by 20%.” He further added that “Bangladesh’s brief relation with LNG since August 2018 has proven highly turbulent with the economy bearing the brunt of high import cost, exposing the energy sector’s structural weaknesses.”

The Financial Trap

Now the situation is a structural financial trap. The roots of this trap lie in a 2010 emergency energy law, namely the Quick Enhancement of Electricity and Energy Supply (Special Provision) Act 2010. By bypassing open bidding and blocking legal oversight, the government rushed into secretive, dollar-based power contracts. Today, the state bleeds billions of dollars annually in ‘capacity charges’ for over 11,000 MW of idle power plants, which were built based on the biased Power System Master Plan (PSMP) 2016. Because these contracts require the government to pay private developers whether or not the electricity is used, the falling value of the Taka is rapidly depleting our foreign exchange reserves. This creates a bitter paradox: factories suffer from blackouts while a massive surplus of power plants sits idle.

Capacity Without Fuel

As of January 31, 2026, Bangladesh’s grid-based power generation capacity accounted for 28,919 MW, industries operated about 2,800 MW of captive generation, and off-grid renewables contributed 608 MW. Natural gas remains the dominant fuel at 43%, followed by coal at 21.7%, furnace oil at 19.5%, power imports at 9.3%, renewables at 2.9%, and hydro at 0.8%. Combined cycle plants dominate, followed by steam turbines and reciprocating engine-based plants.

After a slump in LNG imports in FY2022-23 due to high prices, the imports surged in FY2023-24 and FY2024-25. LNG as a fuel is very expensive, leading to significant price increases in gas between January 2023 and May 2025. Yet LNG increases the energy sector’s subsidy burden. Imported fossil fuel dependence and rising power generation costs have already widened the BPDB’s revenue shortfall to 55,600 crore in FY2024-25. The falling local gas production compels the government to fill the gap by increasing LNG imports. Yet, there is a gap between growing demand and supply for gas.  High price of LNG could tempt the government to opt for gas supply rationing, widening demand–supply gap. This may ultimately result in load shedding. With power demand likely to soar to 18,000MW during the 2026 summer, global fuel supply disruptions could impact power generation. This is because Bangladesh relies on imports to meet 65% of its primary energy demand. 

The power generation cost will likely increase due to the high volatility of fossil fuel prices in international markets. The government will likely need to raise power tariffs in the foreseeable future.

Shafiqul Alam said, “The average price of the recent spot purchases is hovering around USD21/MMBtu and given that the long-term contracts are suspended, the government will likely provide more than USD1 billion to import LNG for the period from April to June 2026”.

Geopolitical Shock and Supply Disruptions

On March 2, QatarEnergy issued a notice of “potential Force Majeure” to Petrobangla due to escalating regional hostilities. Bangladesh has been forced to pivot to the spot market to secure LNG.

Meanwhile, Eastern Refinery Limited, a state-owned oil refinery in Bangladesh that supplies around 40% of the country’s petroleum products, reduced throughput to stretch crude reserves, underscoring the fragility of the supply chain. Since the inception of Bangladesh’s LNG era in 2018, the country has processed 504 cargoes, totalling nearly 31.24 million tonnes, as of FY 2024-25, according to a report by Rupantarita Prakritik Gas Company Limited.

The Renewable Question

Several factors are at play. First, the government’s intent: although we have a renewable energy (RE) target of 20% by 2030 and 30% by 2040, the interim government arbitrarily cancelled all alleged RE power plant contracts without a prompt installation plan. Second, Utility-scale solar deployment has been legally blocked by the strict enforcement of the National Land Use Policy 2001, which prohibits the use of agricultural land for energy infrastructure. Third, we lack a roadmap for the transition. Change Initiative has recently revealed the real potential of 15,000 MW-20,000 MW renewable energy potential for Bangladesh without using any arable lands. Still, the government should have a holistic plan to address future uncertainty.

M. Zakir Hossain Khan, Chief Executive of Change Initiative, argued that Bangladesh lacks a clear roadmap for transition.

“Distributed and rooftop solar can solve the LNG import-trap and ensure uninterrupted power at a lower cost,” he said. “We should focus on renewable-led energy sovereignty rather than depending on external fossil fuel systems.”

He warned that without decisive reforms in the next 12–18 months, Bangladesh could face blackouts and macroeconomic instability.

“Keeping the country dependent on imported fuel is like passively waiting for collapse,” he said.

For Bangladesh, the crisis is no longer just about energy. It is a macroeconomic, fiscal, and export crisis driven by structural import dependence in a volatile global market. Without urgent reform, the LNG-heavy model that once promised stability may instead deepen financial vulnerability and industrial decline.

Shafiqul Alam added, “fixing Bangladesh’s energy sector’s structural weaknesses and imported fossil fuel dependence will take time, but the government should deploy measures on the ground for a swift expansion of renewable energy, including the low-hanging fruits like rooftop solar and other decentralised systems implementable in rural areas”.