Bangladesh's LNG strategy passes one test, fails another

The Russia-Ukraine war was supposed to teach Bangladesh a simple lesson of never leaving energy security at the mercy of the spot market.

Instead, four years later, the country finds itself confronting another LNG shock. This time, the trigger is not Europe scrambling for gas after Russia cut pipeline supplies, but disruptions to Qatari exports following conflict around the Strait of Hormuz. 

The immediate crisis is different, but the underlying vulnerability is the same. That Bangladesh remains a price taker in one of the world's most volatile energy markets. 

The Ukraine war transformed the global LNG trade almost overnight. Europe replaced Russian pipeline gas with seaborne LNG, bidding aggressively against Asian buyers. Spot prices in Asia briefly exceeded $70 per million British thermal units (MMBtu) in 2022, forcing price-sensitive importers such as Bangladesh and Pakistan to cancel tenders or curtail purchases. 

Bangladesh responded with prolonged electricity shortages and reduced gas supplies to industries, exposing the cost of excessive dependence on the spot market. 

The [ousted] Awami League government subsequently recalibrated its procurement strategy at that time. Instead of relying primarily on opportunistic spot purchases, it accelerated long-term supply agreements with QatarEnergy, OQ Trading of Oman and Excelerate Energy, aiming to lock in predictable volumes under multi-year sales and purchase agreements (SPAs). 

The objective was not necessarily to secure the cheapest gas but to guarantee supply through periods of market stress. The numbers show how Bangladesh's procurement strategy evolved.

In 2023, Bangladesh imported 79 LNG cargoes, of which 56, or nearly 71%, arrived under long-term contracts while only 23 cargoes came from the spot market. By 2024, the spot share had risen to almost 35%. 

In 2025, as domestic demand recovered and the government sought additional supplies, spot purchases surged to 49 cargoes, accounting for 45% of total imports, almost matching the 56 cargoes supplied under long-term contracts. 

Recognising the growing exposure, Petrobangla planned a dramatic shift in 2026. Imports under long-term contracts were scheduled to jump to 86 cargoes, or roughly three-quarters of total LNG imports, while spot purchases were to be reduced to only 17 cargoes. 

The strategy reflected a deliberate attempt to reduce vulnerability to volatile international prices. From a commercial perspective, neither procurement model is inherently superior.

Spot LNG offers flexibility. Buyers can reduce imports when domestic demand weakens or when prices fall, avoiding rigid contractual commitments. During periods of oversupply, spot cargoes can even be cheaper than long-term oil-indexed contracts.

But the spot market becomes brutally expensive during geopolitical crises. Bangladesh learned this during the Ukraine war, when Asian LNG prices reached record highs, and again in 2026 after disruptions to shipments through the Strait of Hormuz drove benchmark prices sharply higher. 

Countries dependent on spot cargoes effectively compete against wealthier buyers willing to pay almost any price for energy security. 

Long-term contracts sacrifice some pricing flexibility but provide certainty. Volumes remain largely guaranteed, financing becomes easier, and governments are less exposed to panic buying. 

That explains why countries across Asia, including Bangladesh, have increasingly returned to multi-year LNG agreements after the Ukraine war. Yet Bangladesh's current LNG crisis illustrates that long-term contracts alone cannot eliminate risk.

The country's dependence on Qatar remains substantial. In 2025, roughly 60% of Bangladesh's LNG requirements came from Qatar under long-term agreements. When conflict disrupted shipping through the Strait of Hormuz, QatarEnergy sharply reduced scheduled deliveries. 

Bangladesh, despite having long-term contracts, suddenly found itself replacing missing cargoes through expensive spot purchases. Since the disruption began, the country has bought dozens of additional spot cargoes simply to prevent severe gas shortages. 

The episode highlights an often-overlooked distinction between contractual security and supply diversification. Long-term contracts protect buyers against price volatility but not necessarily against geopolitical concentration if most supplies originate from one producer or transit one maritime chokepoint.

Bangladesh therefore needs a broader energy strategy than simply signing more SPAs.

The first priority should be supplier diversification, expanding procurement beyond Qatar to include producers such as the United States, Australia and additional Middle Eastern suppliers. 

Second, the government needs to expand floating storage and regasification capacity so cargoes can be received more efficiently during demand peaks. Third, accelerating domestic gas exploration—both onshore and offshore—would reduce import dependence over the longer term. 

Finally, continued investment in renewable energy and improved industrial energy efficiency can moderate the growth of LNG demand itself.

The Ukraine war changed how governments think about energy security. Bangladesh understood the lesson and shifted decisively toward long-term LNG procurement. But the latest disruption demonstrates that contracts alone are not enough. 

True energy resilience depends on diversity—of suppliers, shipping routes, fuel sources and domestic production. Without that diversification, every geopolitical shock will continue to reverberate through Bangladesh's economy. 

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