Bulk LPG imports can cut costs, but storage capacity must keep pace

Liquefied petroleum gas (LPG) could play an important role in Bangladesh's energy security over the next two to three years. In areas facing shortages of natural gas, LPG can serve as a readily deployable alternative. But securing a stable and reliable supply of this largely import-dependent fuel will require greater emphasis on coordinated bulk imports, long-term supply contracts, and adequate storage and distribution infrastructure.

If the government and LPG operators jointly import LPG in large volumes, Bangladesh could strengthen its bargaining position in international markets. Bringing in larger cargoes on bigger vessels can reduce freight, handling and logistics costs on a per-unit basis. At the same time, predictable and sustained demand can create opportunities to negotiate better commercial terms with international suppliers.

However, importing LPG in larger volumes alone does not guarantee a significant reduction in prices. LPG prices are closely linked to international markets, while global prices, the dollar exchange rate and freight costs can directly affect domestic prices. The principal benefit of long-term contracts and joint procurement, therefore, would be greater supply security, lower exposure to sudden market disruptions and potential savings on transportation and supplier premiums.

Coordinated bulk procurement can improve Bangladesh's negotiating position. Larger vessels can also lower freight, handling and logistics costs per unit. Where demand is consistent and predictable, international suppliers may be more willing to offer competitive commercial terms. But a long-term contract should not be seen as a guarantee that international market prices will always remain low.

Joint procurement must also be built around transparent tendering, multiple international suppliers, benchmark-based pricing and independent oversight. This would allow Bangladesh to capture the benefits of scale while reducing the risk of excessive dependence on any single supplier or source.

Another major weakness in Bangladesh's LPG sector is inadequate storage and distribution infrastructure. As demand grows, the country will need to expand jetties, bulk storage facilities, mother depots, regional storage, bottling plants and safe transportation systems.

The goal is to make LPG a safe, accessible, affordable and uninterrupted source of energy for the people of Bangladesh.

Without sufficient storage and distribution capacity, any disruption in international supply or delay in the arrival of a vessel could quickly create shortages and price volatility in the domestic market. Increasing import volumes, therefore, is only part of the solution. The country must simultaneously build the capacity to safely store imported LPG and distribute it quickly across different regions.

Particular attention should be given to developing large-scale bulk storage facilities and regional depots. Building storage capacity closer to different parts of the country would ease pressure on ports and make the distribution network more resilient, allowing supplies to reach consumers more quickly when disruptions occur.

Public-private partnerships could play an effective role in developing this infrastructure. The government can facilitate land, approvals, port connectivity, waterways, safety standards and policy support, while the private sector can bring capital, technology, operational expertise and investment in distribution networks.

A joint model could be particularly effective for developing common-user jetties, large bulk storage facilities and regional depots. But every such project must have mandatory requirements for fire safety, adequate safety distances, environmental protection and emergency response systems.

Bangladesh's LPG sector is currently almost entirely dependent on imports. In fiscal year 2024-25, state-owned entities produced around 20,000 tonnes of LPG, while private-sector imports stood at approximately 1.55 million tonnes. This high level of import dependence leaves the domestic market vulnerable to major disruptions in international supply.

Reducing this vulnerability will require imports from multiple sources, long-term supply agreements and strategic storage capacity, alongside efforts to expand domestic production. Greater potential should also be explored for LPG production through domestic gas processing, condensate and refinery operations.

Over the next two to three years, however, some of the most immediate opportunities for LPG lie in residential cooking, hotels and restaurants, bakeries, and small and medium-sized industries. These sectors can shift from natural gas to LPG with relatively less time and investment.

There is also scope to use LPG in industrial boilers, dryers, furnaces and food-processing operations. In selected applications, it could also be considered for captive power generation. In the transport sector, however, any expansion of autogas must place safety above all other considerations.

Infrastructure development is also important if LPG prices are to become more competitive. International prices and the dollar exchange rate remain largely beyond Bangladesh's control. But there is room to reduce part of the supply cost by lowering freight, port and jetty charges, transportation expenses and storage costs.

A rational tax and tariff regime for LPG, cylinders, valves, regulators and safety equipment should therefore be accompanied by greater investment in jetties, terminals, bulk storage and road- and waterway-based distribution systems.

Bangladesh also needs a transparent pricing mechanism that remains aligned with international markets and can be adjusted regularly. If tax concessions or reductions in operating costs are introduced, effective monitoring and accountability across the supply chain—from import to retail—will be necessary to ensure that the benefits ultimately reach consumers.

The long-term development of the LPG sector requires a comprehensive national LPG policy. Without adequate jetties and bulk storage, strong safety oversight, and trust-based cooperation between the public and private sectors, it will be difficult to expand the industry sustainably.

Our goal is simple: to establish LPG as a safe, accessible, affordable and uninterrupted source of energy for the people of Bangladesh.