Highlights:
- Iran-US-Israel conflict threatens Bangladesh’s fuel, LNG and fertiliser supplies.
- Government plans 90-day strategic fuel reserves and alternative imports.
- LNG supply disruptions have increased reliance on the spot market.
- Bangladesh is seeking new fertiliser suppliers outside the Middle East.
- Prolonged conflict could raise import costs, subsidies and inflation.
The government fears a prolonged Iran-US-Israel conflict could severely disrupt Bangladesh’s energy security, agricultural production and overall economy by interrupting supplies of fuel oil, liquefied natural gas (LNG) and fertiliser from the Middle East.
Officials warn that a prolonged supply disruption could simultaneously affect power generation, industrial production, transport, and agriculture, while pushing up import costs, dollar demand and inflation.
To reduce the risks, the government is moving to build strategic fuel oil reserves equivalent to 90 days of demand and has accelerated efforts to source fuel and fertiliser from alternative markets.
Officials from the Energy Division, Petrobangla, Bangladesh Petroleum Corporation (BPC), and the Ministry of Agriculture said emergency preparations have begun in anticipation of prolonged disruption to Middle Eastern supply chains.
As part of the plan, the government has decided to import fuel oil worth nearly Tk16,080 crore through government-to-government (G2G) agreements with six countries while continuing purchases through international tenders.
Officials said Bangladesh is also negotiating with new fertiliser suppliers, particularly countries that do not depend on Middle East shipping routes.
At the same time, the government is ensuring foreign currency availability for LNG imports, while the Energy Division is working with private operators and BPC to maintain LPG supplies.
LNG remains biggest concern
Officials said LNG remains the government’s biggest concern as Bangladesh currently relies heavily on imported LNG to compensate for the steady decline in domestic gas production
Bangladesh has traditionally met much of its LNG demand through long-term contracts with Qatar and Oman.
However, supplies from those sources have been largely disrupted following the conflict, making the country increasingly dependent on the spot market.
A senior Energy Division official said LNG imports from the spot market are continuing to maintain gas supplies.
On 30 July, the Cabinet Committee on Government Purchase approved the import of the country’s 42nd LNG cargo this year at $22.35 per MMBtu, valued at about Tk949.43 crore. Proposals to purchase two more cargoes are under process.
The government plans to import around 60 more LNG cargoes during the remainder of the year.
Bangladesh’s two Floating Storage and Regasification Units (FSRUs) can together process and supply up to 1,100 million cubic feet of gas a day, equivalent to about 116 LNG cargoes annually.
However, both facilities are not always operational.
Recently, an FSRU operated by Excelerate Energy became inoperative due to a recent fire, reducing LNG regasification capacity by half and triggering gas shortages across sectors, including industry.
On 28 July, the Cabinet Committee on Economic Affairs also gave in-principle approval to import 78 LNG cargoes over the next 13 years from US-based Gunvor USA LLC.
According to the proposal, Petrobangla currently has seven LNG supply contracts with five entities in the US, Qatar, Oman and Saudi Arabia.
Additional imports are needed to meet growing domestic demand and ensure uninterrupted gas supply.
Officials said the recent conflict has shown that contracts and sufficient funds do not necessarily guarantee LNG supplies.
After the conflict began in March, several international suppliers reportedly failed to deliver contracted cargoes after securing higher prices elsewhere.
In one instance, an LNG cargo already heading to Bangladesh was diverted to another destination.
Alternative supplies and strategic reserves
To prepare for any prolonged disruption, the government has launched a plan to build strategic fuel oil reserves equivalent to at least 90 days of demand.
The plan includes using Bangladesh Railway fuel tankers, storage facilities owned by the armed forces, police and other government agencies, as well as private-sector storage capacity, to ensure uninterrupted fuel supplies for power generation, transport and other essential services.
BPC’s FY2026-27 budget projects imports of 68.55 lakh tonnes of refined fuel and 15 lakh tonnes of crude oil, with around 92% of domestic fuel demand to be met through imports.
The corporation also plans to import 4.8 lakh tonnes of LPG this fiscal year.
According to the budget, maintaining fuel reserves equivalent to 60 days of demand throughout the year, particularly during the irrigation season, remains a major challenge.
Petrobangla data also shows Bangladesh’s growing dependence on imported LNG as domestic gas production declines.
Any major disruption to LNG supplies would affect gas-fired power plants, export-oriented industries and fertiliser factories.
Fertiliser crisis threaten agriculture
The government also sees significant risks for agriculture, as Bangladesh imports most of its chemical fertilisers, including DAP, TSP and MOP, while domestic production meets only part of its urea demand.
The Ministry of Agriculture estimates annual demand at 26 lakh tonnes of urea, 15.2 lakh tonnes of DAP, 10.1 lakh tonnes of MOP and 7.65 lakh tonnes of TSP. Domestic factories produce about 10 lakh tonnes of urea, although production has been constrained in recent years by gas shortages.
Agriculture Secretary Rafiqul E Mohamed told The Business Standard that disruptions to shipping through the Strait of Hormuz and surrounding sea routes have forced the government to seek alternative suppliers.
“The government is trying to procure fertiliser, fuel oil and other petroleum products from alternative sources. There is no alternative to this under the current circumstances,” he said.
He said Bangladesh is shifting its focus from traditional Middle Eastern suppliers to countries including Brunei, Morocco, Malaysia and China, while discussions have also begun with Canada and Tunisia. Talks were also held with Oman on Thursday.
“The government is taking all necessary steps to ensure imports and build stocks of essential agricultural inputs. Cost is not the priority at this stage. Ensuring supply is,” he added.
Finance Ministry officials warned that a prolonged conflict could trigger a second wave of economic pressure through higher global prices for fuel, LNG and fertiliser, increasing import costs, foreign exchange demand and government subsidy requirements.
They said higher energy prices would eventually raise transport, electricity and industrial production costs, adding to inflationary pressure.
Former Bangladesh Bank officials said previous global energy shocks had significantly increased Bangladesh’s import bill and put pressure on foreign exchange reserves and the exchange rate.
Officials said the government’s immediate priorities are to ensure uninterrupted supplies of fuel, LNG and fertiliser while limiting the impact of higher international prices.
However, they acknowledged that if the conflict persists and Middle Eastern supply chains fail to recover, securing adequate supplies will become Bangladesh’s biggest challenge.
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