Bangladesh plan for expensive LNG investment draws criticism

Bangladesh is set to pay well above industry prices for its third floating storage and regasification unit (FSRU) at a time when the South Asian nation is already financially embattled due to high LNG prices. The pending deal is drawing criticism both domestically and internationally.

The government agreed in principle on July 28 to a third offshore LNG terminal with daily fees running 35% to 37% higher than existing contracts for its other two units. Provided by Beijing-based China National Energy Engineering & Construction Co. (CNEE), the agreement went through an unsolicited government-to-government framework without open bidding, leaving a host of unanswered questions. According to local reporting citing government documents, state negotiators conceded they were unable to verify if the premium is commercially sound.

Under the proposed 15-year Build-Own-Operate (BOO) agreement, CNEE would charge $342,000 per day, a steep jump from existing FSRUs operated by Texas-based Excelerate Energy ($254,000/day) and Singapore-based Summit LNG ($249,115/day). The offer also eclipses Petrobangla’s internal benchmark of $239,653/day, leaving the state-owned energy firm facing a $1.002 billion overall payment commitment.

While CNEE attributes the markup to Middle Eastern volatility, rising material costs, and a tight 18-month delivery window, energy experts question both the price tag and the viability of the timeline for a firm with no prior FSRU development track record. CNEE is an engineering/construction firm, not a primary FSRU vessel owner or operator.

Former Bangladesh University of Engineering and Technology (BUET) engineering dean Mohammad Tamim publicly challenged the project’s logic. “If the previous ones [FSRUs] were cheaper, why should we now go for a new one at a higher price? I don’t see the justification,” he said. Tamim also questioned the proposed 18-month implementation schedule, saying that even with a suitable LNG carrier already available, meeting the deadline would be “very unlikely,” given the need for geological surveys, wave analysis and other site work.

Jonathan Stern, Senior Research Fellow at the Oxford Institute for Energy Studies, also expressed caution regarding the commercial logic of procuring high-cost regasification assets in the current market.

“I would suggest the key to this is the commercial case for a third FSRU to be purchased in the present market circumstances,” he told Gas Outlook. “What will be the value added by the unit and for which sectors of population, industry or power generation? It is never ideal to purchase a new plant in a tight market and there should be a convincing commercial case for doing so.”

Crippled electricity generation

Bangladesh’s FSRU decision is exacerbated by its over-reliance on LNG, which in turn is due to a steep drop in domestic gas production over the past decade. Between the 2015 peak and 2025, Bangladesh lost nearly 30.4% of its domestic gas production, a loss of over 8.15 billion cubic metres (bcm) of annual indigenous supply, with losses coming primarily from legacy field production like Titas and Bibiyana, according to CEIC data.

Because domestic supply dropped, Petrobangla became structurally dependant on LNG imports, setting the stage for the current rush to approve costly third FSRU infrastructure despite severe foreign exchange constraints and inflated daily regasification tariffs.

Compounding the issue, as of 2025, only 2% of Bangladesh’s electricity was derived from clean sources, well below the global 43% average, according to Ember data. Some 98% came from fossil fuels, with LNG making up around 40% of its gas supply.

Bangladesh spent $17.6 billion between August 2018 and mid-July 2025 to import around 1,500 bcf of LNG, 1.5 times the country’s current annual gas output, according to the Institute for Energy Economics and Financial Analysis (IEEFA). Bangladesh’s gas shortage is causing widespread brown- and blackouts nationwide due to what Reuters has called “crippled electricity generation.”

Bangladesh’s gas crisis is now disrupting economic activity beyond just the power and energy sector. Factories are reportedly cutting or halting production, Compressed Natural Gas (CNG) filling stations are struggling with near-zero gas pressure, and homes are facing severe gas shortages, Dhaka-based The Daily Star reported.

Subsidies conundrum

Dhaka’s gas subsidies, designed to keep domestic energy prices low for households, factories and power plants despite soaring fuel import costs, are also causing significant financial damage to the economy. The International Monetary Fund (IMF) warned this year that Bangladesh needed to reform its subsidy scheme, arguing that delays in subsidy reform have constrained the country’s fiscal space.

More specifically, it found that spending increased in FY25 largely because of higher subsidies covering the widening electricity cost-recovery gap and clearing arrears. It also warned that persistently weak government revenue combined with large subsidies can squeeze public capital and social spending. Rapidly increasing LNG prices since the start of the year, along with supply constraints have intensified the problem. Bangladesh received 60% of its LNG supply from legacy producer Qatar Energy in 2025. However, that amount has dropped by around 50%, according to Petrobangla.

In lock step, the country has turned to the volatile Asian LNG spot market, where prices have more than doubled since late February. By the third week in September, prices for LNG delivered into North Asia hovered in the mid-$20’s per million British thermal units (MMBtu) price point, up some 130% year-on-year.

Since Bangladesh still subsidises gas prices for domestic end users, those increases have placed an even greater burden on government coffers. In June, The Business Standard reported, citing Petrobangla data, that the country’s LNG subsidy requirement had jumped from Tk6,000 crore ($480 million) to Tk16,600 crore ($1.35 billion) for FY2025-26 after the Iran-war supply shock forced greater reliance on expensive spot LNG.

Global LNG volatility and supply risks are also putting pressure on Bangladesh’s foreign exchange reserves and public finances. The government recently approved another $350 million in financing aimed partly at helping Petrobangla pay for LNG imports and move toward longer-term contracts rather than expensive spot purchases.

Bangladeshi energy minister Iqbal Hasan Mahmud said at the Gastech conference on September 14 that high LNG prices were slowing the country’s industrial growth, forcing electricity outages and stifling spending on development projects due to more gas subsidy spending.

As LNG prices rise, the subsidies provided by the government to gas ​consumers are also going up, “and that is affecting our budgetary provisions for the ​other development programs,” he added. The government spends around 4% of its GDP per annum on subsidies for the power sector and gas.