Bangladesh Must Accelerate Domestic Gas Exploration to Cut Import Reliance: Economists

Dhaka, August 4, 2026 — The Bangladesh government should speed up domestic gas exploration to expand supply and reduce the country's reliance on costly imports, according to economists, as the prolonged gas shortage hurts private investment, industrial output, and export competitiveness across multiple sectors of the economy.

The gas crisis has persisted for years, leaving industries to operate with inadequate supplies, said Khondaker Golam Moazzem, research director at the Centre for Policy Dialogue (CPD). He warned that the recent disruption to gas supply from a floating liquefied natural gas (LNG) terminal had made the situation worse — and that even after the Floating Storage and Regasification Unit (FSRU) resumes operations, it will only restore the previous level of shortages rather than solve the underlying problem.

💬 CPD: Structural Challenge, Not Temporary Shortage

Moazzem said higher LNG imports alone could not close the supply gap. Bangladesh must recognise gas shortages as a structural challenge in the near term while accelerating domestic gas exploration and diversifying its energy sources. The framing matters: treating the crisis as temporary justifies short-term fixes, while treating it as structural demands sustained policy attention and investment in long-term solutions.

He said the business environment is already under pressure from weak global demand, sluggish exports, and high inflation. In this context, protecting existing investment is more important than attracting new investment — a notable inversion of the usual policy priority that reflects how severe the industrial pressure has become.

"The immediate priority should be ensuring that existing factories continue operating," Moazzem said. He also urged the government to prioritise financially distressed but operational factories when providing incentives, arguing that supporting struggling businesses would generate greater economic benefits than focusing on factories that have already closed — since closed factories represent sunk losses, while distressed-but-operational factories still have the potential to recover if given targeted support.

Moazzem added that industries should gradually reduce their dependence on natural gas by investing in energy-efficient machinery, electricity-based production systems, renewable energy, and other technologies that could cut energy use by 15 to 20 percent. The efficiency gains would not solve the supply crisis on their own, but they would meaningfully reduce the demand-side pressure that has made the crisis so acute.

💬 Policy Exchange Bangladesh: Production Down 30-50%

M Masrur Reaz, chairman and chief executive officer of Policy Exchange Bangladesh, said years of inadequate onshore and offshore gas exploration have left Bangladesh heavily dependent on imported LNG, making the country vulnerable to global supply disruptions and price volatility. The structural dependence on imported fuel has transformed what should have been a domestic resource management issue into a foreign exchange and geopolitical vulnerability.

He said limited LNG import infrastructure has further constrained gas supply, forcing many industries to operate below capacity. The infrastructure bottleneck means that even when Bangladesh can afford to import more LNG, the country lacks the regasification capacity to convert it into pipeline-quality gas at the volume needed to meet industrial demand.

According to Masrur, gas shortages have reduced production by 30 to 50 percent in sectors such as garments, textiles, steel, and ceramics, while power disruptions caused by fuel shortages have also affected small and service-oriented businesses. The resulting uncertainty has discouraged both local and foreign investors from expanding operations or making new investments — a dynamic that compounds the immediate production losses with longer-term investment damage.

Masrur said Bangladesh should urgently secure additional long-term LNG supply agreements to stabilise gas availability and prices while ensuring adequate foreign exchange support for imports. Over the medium term, he called for faster onshore and offshore gas exploration and quicker progress on renewable energy projects to reduce dependence on imported fuel.

💬 RAPID: Deepening Investment and Production Crisis

Mohammad Abdur Razzaque, chairman of Research and Policy Integration for Development (RAPID), said Bangladesh is facing more than a temporary industrial slowdown. His assessment is perhaps the most sobering of the three.

"The country is confronting a deepening investment and production crisis, where the energy shortage, banking-sector weaknesses, high financing costs, policy uncertainty, and weak business confidence reinforce one another," he said. The framing is significant: Razzaque is describing a vicious cycle in which each negative factor amplifies the others, making any single-policy intervention insufficient.

He said the gas shortage had become a major burden on industry. Factories operating below capacity faced higher unit costs, delayed deliveries, and weaker competitiveness — a combination that erodes both profitability and export market share. The impact was even greater on new investment, since investors evaluating Bangladesh as a destination now have to factor in the risk of unreliable energy supply when calculating expected returns.

Razzaque said Bangladesh continues to pursue industrial growth despite declining domestic gas production, costly LNG imports that are vulnerable to external shocks, and inadequate transmission and distribution infrastructure — raising questions about the credibility of its policy approach. The gap between industrial growth ambitions and energy supply realities has become a defining contradiction of Bangladesh's current economic trajectory.

"There has been no shortage of recommendations. The priority now is implementation," he added — a pointed observation that the policy prescriptions for Bangladesh's gas crisis have been clear for years, but execution has lagged behind analysis.

📊 Production Losses by Sector

The economists' assessments paint a consistent picture of sector-wide production losses driven by the gas crisis:

• 👕 Garments: 30-50% production loss
• 🧵 Textiles: 30-50% production loss
• 🔧 Steel: 30-50% production loss
• 🪩 Ceramics: 30-50% production loss
• ⚠️ Small and service businesses: Affected by power disruptions
• 👥 Investors (local and foreign): Discouraged from expanding or investing

🔍 What Needs to Happen

Drawing on the three economists' recommendations, a coherent policy agenda emerges:

• ⛏️ Accelerate onshore and offshore gas exploration — the only long-term solution to declining domestic production
• 💰 Secure additional long-term LNG supply agreements — to reduce exposure to spot market volatility
• 🧡 Ensure adequate foreign exchange support for LNG imports — preventing gas supply from being constrained by reserve concerns
• 💳 Prioritise financially distressed but operational factories for incentives — protecting existing investment
• 🔌 Invest in energy-efficient machinery and electricity-based production — cutting demand by 15-20%
• ☀️ Accelerate renewable energy projects — reducing dependence on imported fuel over the medium term
• 👥 Address banking sector weaknesses and policy uncertainty — breaking the vicious cycle of reinforcing crises

📋 Strategic Context

The economists' analysis reinforces what industry leaders have been saying for months: Bangladesh's gas crisis is not a transient shock but a structural constraint that will define the country's industrial trajectory for years to come. The July 21 FSRU fire has made the immediate situation worse, but even with the FSRU back online, the underlying supply-demand gap of roughly 1.1 billion cubic feet per day would remain — and that gap would continue to impose significant production losses across the export-oriented sectors that drive Bangladesh's economy.

The fact that three of Bangladesh's most respected economic think tanks — CPD, Policy Exchange Bangladesh, and RAPID — are singing from the same songbook on the need for structural gas sector reform should send a clear signal to policymakers. The recommendations are well-known, the diagnosis is consistent, and the cost of inaction is mounting by the day. What remains to be seen is whether the government will treat this as the strategic priority that the economists' analysis suggests it should be — or whether the gas crisis will continue to grind down industrial competitiveness one factory at a time.