Bangladesh's gas crisis is turning from a summer emergency into a potentially very expensive winter bill, with Qatar unable to say when its LNG will flow again.
QatarEnergy told buyers in Bangladesh and Pakistan in late September that cargo cancellations would run through November, the latest of the roughly monthly roll-overs since it declared force majeure in March after Iranian strikes on Ras Laffan. Qatar supplied close to 60% of Bangladesh's LNG before the war, and Dhaka is now chasing replacement cargoes in a tightening winter market.
The country is living through its most serious electricity crisis since Prime Minister Tarique Rahman's government took office in February, according to a brief by the Institute of South Asian Studies (ISAS) at the National University of Singapore published on September 11. Gas supplies fell to their lowest level in 16 years in July and August, and daily load shedding passed 3,500 MW at the peak.
At the worst point in mid-August, with one floating LNG terminal out of action for repairs and the other cut off from its supply tanker by extended periods of bad weather, gas supply slumped to about 1,930mn cubic feet a day (mmcfd) against demand of around 3,800 mmcfd, The Daily Star reported on August 14.
“Now I can only count the days,” Energy Minister Iqbal Hassan Mahmood Tuku said at the time, as engineers worked on the damaged terminal.
This is a pure fuel crisis as opposed to being anything near a shortage of power stations. Bangladesh has more than 23,000 MW of installed generating capacity, but much of it burns gas the country no longer has. Domestic output has fallen to about 1,600 mmcfd from 2,700 mmcfd a decade ago and is declining by around 150 mmcfd a year, so every month without Qatari volumes pushes state importer Petrobangla deeper into the spot market.
A billion-dollar quarter
The Institute for Energy Economics and Financial Analysis (IEEFA) estimates in new modelling that Bangladesh will spend an extra $1.09bn (BDT135bn) on LNG between August and October. It assumes average prices of $26 per million British thermal units (MMBtu) in September and October, against about $11.5/MMBtu before the war in the Gulf.
A cabinet committee approved spot cargoes from Vitol at $29.795/MMBtu and TotalEnergies at $28.95/MMBtu on September 14, almost three times what Bangladesh typically paid before the war, The Daily Star reported. The government has also had to sign off on $3.1bn in short-term borrowing from the Jeddah-based International Islamic Trade Finance Corporation to keep fuel and LNG imports moving.
Around 900 textile mills - the core of Bangladeshi trade exports - suspended operations in August, ISAS says, and industry representatives in the Narsingdi textile belt told The Daily Star they were losing BDT4bn-5bn a day.
The tariff question
Power plants in Bangladesh still buy gas at a heavily subsidised BDT15.5 per cubic metre, far below the cost of imported LNG even before the crisis. IEEFA says the state will keep covering the extra cost for now but will have to adjust gas prices eventually. If the power-sector price rose to BDT25 per cubic metre, the fuel cost of generating a kWh in an efficient combined-cycle plant would climb to BDT4.65 ($0.038) from BDT2.88, it calculates.
Petrobangla has already asked for that. In late July it proposed lifting the gas price for power plants by 56% to BDT25 per cubic metre and for fertiliser plants by 83%, pending a public hearing by the Bangladesh Energy Regulatory Commission (BERC).
A pass-through to consumers would be the second this year but would prove highly unpopular. BERC raised average retail power tariffs by 16.7% to BDT10.63 per kWh in June, then partly retreated by sparing low-income households. ISAS records attacks and protests at rural electricity offices.
Dhaka walked away from its previous IMF programme earlier this year and is now negotiating a new three-year package of about $4.5bn, with the Fund pressing to keep automatic fuel pricing and cut fertiliser subsidies, The Financial Express reported on October 11. Finance Minister Amir Khosru Mahmud Chowdhury, who had said Bangladesh could not depend on IMF money, changed tone after meeting the Fund in Bangkok on October 15.
“There will, of course, be conditions. The conditions will be met,” he told local media.
More of the same medicine
For now, Dhaka's longer-term answer is more LNG. It plans to expand from two import terminals to five, with a third floating unit at Kutubjom due in 2028 and a land-based terminal at Matarbari by 2030, and has signed up for 117 US cargoes from Gunvor to 2038. On October 13 a cabinet committee recommended buying nine more cargoes from five suppliers, including Shell, BP and Cheniere, for delivery between December 2026 and December 2027, The Business Standard reported.
Research group Zero Carbon Analytics counts 11.3mn tonnes a year of LNG import capacity under development, which would more than double the existing 8.3mn tonnes, and argues that imported LNG is no safe bet for energy security. Energy expert Badrul Imam has made the case for domestic exploration over more floating terminals.
And as Hormuz remains one of the world's most dangerous chokepoints, QatarEnergy needs about two months to bring its 12 undamaged trains back once it judges the strait secure. The two trains wrecked at Ras Laffan meanwhile will take years to repair and Europe, whose own gas crisis left storage at its lowest for the date since 2011 in late September, is bidding for the same spare cargoes.
Added to the mix in Bangladesh is the fact that the Russian-built Rooppur nuclear plant's first unit reached criticality in October, one more sign that Russia's nuclear exports are booming, but it will feed the grid only in stages from late November. On-grid renewables total less than 1,500 MW, a fraction of the numbers needed.
Since August Dhaka has rationed shop hours, borrowed to pay for fuel and bought cargoes at near-record prices, all while trying to keep the pain off household bills. The tariff decision, the terms of the US LNG contracts, whether garment factories face formal gas rationing as winter fertiliser demand rises, and what the IMF extracts on energy subsidies will show whether that strategy can survive a second winter without Qatar.