High LNG Prices Slow Bangladesh's Industrial Growth, Minister Says

High liquefied natural gas prices are weighing on Bangladesh's industrial expansion, the country's power minister said, pointing to electricity outages and reduced funding for development projects as subsidy costs mount.

"Industrial growth is slowing down, and production is going down," power minister Iqbal Hasan Mahmud said at the Gastech conference. "It is having a big effect."

Mahmud said rising LNG prices have driven up the subsidies the government provides to gas consumers, cutting into the budget available for other development programmes. "Slowly, (it is) becoming impossible to go for the other programmes," he said.

The South Asian nation of about 170 million people draws more than 40% of its electricity from largely imported LNG. Even before the U.S.-Israeli war with Iran, it spent nearly 4% of its GDP annually on power and gas subsidies, according to calculations based on IMF data.

Bangladesh turned to expensive spot-market cargoes after its main supplier, Qatar, which accounted for 95% of its imports, halted exports following the effective closure of the Strait of Hormuz. Asian spot LNG prices have more than doubled since the war began, reaching $25.70 per million British thermal units last week — their highest level since December 2022.

Diversifying supply and expanding renewables

With Middle East suppliers effectively shut out, Mahmud said Bangladesh is looking east towards Indonesia, Australia and China. Russian supplies remain out of reach because of Western sanctions, he added, noting that as one of the largest garment exporters to the United States, Bangladesh has to comply with those restrictions.

The country also plans to install 10,000 megawatts of solar power over the next five years to cut its reliance on imported fossil fuels, and will offer five-year tax holidays to investors in solar and lithium batteries, Mahmud said.

Bangladesh has held discussions with China on installing small modular nuclear reactors, he said, and could also increase its use of coal, whose prices have been relatively stable since the Iran war began.