High LNG prices continue to slow Bangladesh’s industrial growth

Bangladesh’s industrial growth is facing renewed pressure from high liquefied natural gas (LNG) prices, with the government warning that costly imported gas is affecting manufacturing, electricity generation and public finances.

Power Minister Iqbal Hasan Mahmud said high LNG prices are significantly hampering industrial growth as Bangladesh deals with disruptions to international gas supplies and higher costs for spot-market purchases. More than 40 percent of Bangladesh’s electricity generation is linked to imported LNG, according to Reuters.

The pressure has intensified following disruptions to LNG shipments from the Gulf. Qatar, a major supplier to Bangladesh, halted exports amid the conflict involving Iran and the closure of the Strait of Hormuz. Bangladesh has consequently had to seek more expensive LNG from the spot market, where prices have more than doubled during the current supply shock.

Recent procurement decisions show the scale of the increase. Bangladesh has approved LNG purchases at prices approaching $30 per million British thermal units (MMBtu), almost three times the level paid before the current Middle East conflict.

Pressure on factories and electricity

For Bangladesh’s industries, the LNG shock comes on top of existing concerns over gas availability and energy costs. Gas is particularly important for export-oriented manufacturing, captive power generation and other industrial operations.

Higher LNG prices increase the cost of electricity generation and put additional pressure on the government when energy prices are kept below procurement costs through subsidies.

The power minister said the government was already spending heavily on electricity and gas subsidies before the latest escalation. Reuters reported that the combined cost had been close to 4 percent of GDP, highlighting the fiscal pressure created by imported energy.

Gas availability has also fluctuated during the crisis. Bangladesh’s gas supply rose to about 2,610 million cubic feet per day (mmcfd) on 15 September, approaching pre-crisis levels as LNG supplies recovered.

The improvement may ease immediate industrial shortages, but it does not remove Bangladesh’s exposure to international LNG prices.

Higher costs spread across the economy

The LNG shock can affect Bangladesh through several channels. For manufacturers, higher energy costs can raise production expenses, particularly for industries that depend heavily on gas for boilers, captive power and other industrial processes.

Companies may respond by reducing operating hours, absorbing higher costs, increasing prices or delaying investment. For exporters, higher production costs can put additional pressure on profit margins in internationally competitive industries.

The effects can also reach consumers as higher energy and electricity costs feed into the prices of manufactured goods and services. At the same time, higher LNG import bills increase demand for foreign currency, potentially adding pressure to Bangladesh’s external accounts when energy imports become significantly more expensive.

“The government says expensive imported LNG is affecting manufacturing, electricity supply and public finances.”

The issue is therefore broader than the price paid for individual LNG cargoes. Energy costs influence factory competitiveness, electricity reliability, government spending and the wider cost structure of the economy.

Dhaka looks for alternative energy sources

The government is attempting to reduce immediate supply risks by looking for LNG from alternative sources, including Indonesia, Australia and China, Reuters reported.

Dhaka is also considering longer-term changes to the energy mix. Plans include installing 10,000 megawatts of solar power and providing tax incentives for renewable-energy investment. Bangladesh is also exploring small modular nuclear reactors with China while considering other sources of electricity generation.

However, LNG will remain important in the short term. The government plans to add another 1,600 mmcfd of LNG supply capacity by 2030 as gas demand continues to rise.

This creates a policy challenge. LNG remains important for maintaining energy supplies and supporting industrialisation, but greater dependence on imported gas also exposes Bangladesh to international prices, geopolitical disruptions and foreign-exchange pressures.

Energy security and industrial growth

The current crisis has highlighted the vulnerability created when an energy-dependent economy relies heavily on imported fuel whose price can change rapidly because of events outside its control.

Reuters reported on 17 September that Asian LNG demand is expected to decline for a second consecutive year in 2026 as high prices and supply disruptions reduce consumption. Asian spot prices have risen sharply following the loss of Gulf supplies, while analysts expect prices to remain elevated into 2027 under continued supply constraints.

For Bangladesh, the issue extends beyond securing enough LNG cargoes for the coming months. The country faces a broader question over how to balance reliable energy for industrial expansion with the fiscal and external costs of imported fossil fuels.

The immediate priority is maintaining adequate gas and electricity supplies for factories and households. Over the longer term, the price shock is increasing attention on domestic gas exploration, renewable energy, energy efficiency and diversification of the electricity mix.

For an economy seeking faster industrial growth, the cost and reliability of energy will remain closely tied to the competitiveness of Bangladeshi production and the sustainability of the country’s wider energy strategy.