In the first days of March, Petrobangla went looking for an emergency cargo of liquefied natural gas (LNG), and no seller would bid. A second tender drew nothing either. Only by negotiating one-to-one did it secure two cargoes, one at $28.28 per million British thermal units against $9.99 in December. The war that closed the Strait of Hormuz exposed something harder to fix than price: the way Bangladesh buys gas.
The budget the finance minister presents on June 11 will answer that with money. He has told parliament the war will require roughly Tk 36,000 crore in extra power, energy and LNG subsidies between March and June. The LNG share alone could reach $1.07 billion in a single quarter, against the Tk 9,000 crore set aside for the whole year. The cheque pays the bill. It does not change why the bill keeps coming.
Bangladesh believed it had two kinds of protection: long-term contracts for steady supply and the spot market as a backup. The war showed they were the same protection in two guises. Its contracted gas comes from QatarEnergy, Oman’s OQ Trading and the American firm Excelerate, and its spot cargoes come from the same region through the same strait. When Qatar declared force majeure in early March, the other suppliers followed because their gas originated in the same place. Qatar alone was due to ship about 40 of this year’s 115 cargoes and Oman another 16, so two safety nets turned out to be a single bet.
The Excelerate arrangement makes the point. While it appears to diversify supply, the gas still originates in Qatar and passes through the same route. When Qatar stopped, the apparent diversification disappeared.
Look at this the way a fund manager would. Bangladesh has concentrated almost everything in one price formula, one route and one chokepoint. No one would run an investment portfolio that way. The country does not mainly have a price problem to subsidise; it has a portfolio nobody designed.
India shows the alternative. Its Qatari cargoes were affected too, but over years it spread purchases across different price formulas and sea routes. Some gas is priced off the American benchmark Henry Hub, near $3, while Asian spot prices surged past $20, and it travels across the Atlantic, far from Hormuz.
Fahmida Khatun has rightly argued for a portfolio approach with caps on any single source. The next step is recognising that buying from more countries is not the same as buying on more price formulas or routes. It is the latter that matters when a key shipping lane closes.
The deeper fixes are real, and the budget should fund them: more domestic gas, more solar and less waste. But none of that changes the cargoes the country must buy next month. The tool is already in hand. In May, the World Bank doubled its energy facility for Bangladesh to $700 million, allowing Petrobangla to finance LNG purchases through letters of credit and short-term credit lines. Right now, it is being used only to pay this year’s premium.
Used by the finance ministry and Petrobangla to anchor a standing framework, it could support three rules: buy a set share of gas on price formulas other than oil so one spike cannot move the whole bill; buy a set share through routes that avoid Hormuz so one closed strait cannot halt supply; and maintain a cleared list of sellers, with the exit clauses this crisis showed were missing, before the next shock.
A budget that only raises the subsidy treats the symptom, not the cause. Bangladesh has been buying gas like a price-taker. It can start buying like an investor who spreads risk, so no single shock can corner the country.
The writer is an investment banker. He is currently managing director at RetailBook and was previously at Citi.
