Bangladesh's Gas Supply Conundrum: Long-Term Contracts vs Spot Market Volatility

QatarEnergy's decision to halve its LNG supply to Bangladesh has left the country struggling to meet its energy needs. The shortfall of 35% has forced Petrobangla to rely heavily on spot market purchases, which have driven up the cost of gas and contributed to a budget increase.

Muhammed Aziz Khan, chairman of Summit Group, argues that costs like these can be contained through structural means, such as diversifying fuel supplies and reducing procurement costs through long-term contracts and expanded infrastructure. His group's power arm, Summit Power International, operates one of the two floating terminals that bring LNG into the country.

The price volatility in spot market purchases is a major concern for Bangladesh, which relies heavily on imported gas to meet its energy needs. Aziz Khan's prescription is to convert this volatility into something predictable by locking in supply through long-term contracts and expanded infrastructure. He believes that this approach would not only reduce the country's exposure to global price fluctuations but also provide a physical buffer against supplier disruptions.

The Bangladesh government has already begun shifting towards term deals, with Summit Group finalizing a 15-year agreement to supply 1.5 million tonnes of LNG a year to Petrobangla. The state importer has also signed a parallel 15-year purchase agreement with Excelerate Energy for roughly 0.85 to 1 million tonnes a year.

The global gas market is moving in the same direction, with buyers signing more than 130 billion cubic meters of new LNG contracts in 2025. This surge in long-term commitments is expected to reduce price volatility and provide greater stability for importers.