Can LNG be a sustainable energy solution to Bangladesh’s RMG?

BDApparelNews Desk
14 September 2018  

Photo collected from the internet

Photo collected from the internet

Bangladesh, the world’s third largest apparel exporter, is seeking sustainable means of energy for its industries, especially at the country’s largest export sector – the readymade garments.

Its garments, the nearly US $30 billion industry which aims to transform into a US $50 billion sector by 2021, is currently plagued by a set of infrastructural curbs. This industry, identified as one of the most growth prospective sector of Bangladesh in the coming decade, has identified energy supply as one of its key setbacks in order to pursue for further growth.

For the readymade garments, gas is an essential commodity in Bangladesh as many of the industries use captive energy for production – using gas to generate electricity for industry-based power plants. According to Petrobangla, the state-run petroleum handler, these power plants use up 17 percent of the total supply. Coupled with industrial use, the demand rises up to beyond 32 percent.

Mahmud Hasan Khan, Vice President for Bangladesh Garment Manufacturers and Exporters’ Association (BGMEA), says that major infrastructural barriers, especially in the supply of gas, is giving the manufacturers a hard time in pursuing aggressive growth strategy. “We are falling behind. We must solve these limitations, especially that of gas. But, it has to be a sustainable solution.”

Up until now, Bangladesh has been using natural gas to feed its industries. According to Petrobangla, there is over 28 trillion cubic feet (TCF) gas left, which is expected to run out by the next 16 years. However, the demand for gas is continuously increasing and Bangladesh witnessed highest ever gas consumption in 2016 – at 1 trillion cubic feet (TCF). Petrobangla says the demand is rising every day.

As an alternative, Bangladesh Government is resorting to import of liquefied natural gas (LNG). It has drawn up elaborate plans to rely on costly imports and proceeding swiftly to its purpose. The US-based Excelerate Energy and local Summit Group are already building two floating LNG terminals in Bangladesh which would have a daily production capacity of 500 million cubic feet (MMCFD). The Government will pay about US $ 1.56 billion a year each for the projects. A third terminal, with the same generation capacity, is also on the cards.


LNG or liquefied natural gas is mostly a predominant composition of methane with some mixture of ethane that has been compressed into liquid form. This liquid form makes it easier to transport in large volume. According to scientists, compared to compressed natural gas, LNG achieves a higher degree of reduction in volume when liquefied. The density of LNG is about 2.4 times greater than that of compressed natural gas. This makes LNG more efficient to be shipped and transported over long distances where pipelines do not exist.

In terms of global producers, LNG manufacturers are all over the world. A report of the International Gas Union in 2017, prepared to identify the 10 market leaders of LNG worldwide, shows Qatar as the biggest global supplier with an overwhelming 29.90 percent market share. Australia stands second in the global LNG supply chain with over 17 percent of market share.



Country Name

Company Name

Exports 2016-17/ Million Tonnes

Market Share percentage













The Petronas LNG Complex





Nigeria LNG





While Indonesia





Algeria LNG










Atlantic LNG





Oman LNG




Papua New Guinea

ExxonMobil PNG Ltd




In October last year, Bangladesh inked an agreement with Qatar to import 2.5 milliontonnesof LNG annually for 15 years to meet the country’s demand.The LNG would be supplied at: 12.65 percent of the three-month average price of Brent oil plus $0.50 constant per MMBTU (1 million British thermal units). Also, Bangladesh Government has been holding talks with various countries, including Oman and Indonesia, for importing LNG.

The US-based Excelerate Energy and local Summit Group are already building two floating LNG terminals in Bangladesh which would have a daily production capacity of 500 million cubic feet (MMCFD). The Government will pay about US $ 1.56 billion a year each for the projects. A third terminal, with the same generation capacity, is also on the cards.

All in all, the progress has been quick and Bangladesh brought its first shipment of LNG last month. A vessel—Excellence—which brought in 137,000 cubic feet of LNG from Qatar is now permanently attached with the base station or the LNG terminal at Bay of Bengal. The base operation is scheduled to begin in the first half of May, and the gas will soon be pumped into the national pipeline.


Last year, Bangladesh hiked the prices of gas by 22.7 per cent at one go, which was implemented in two phases. The nature of the steep hike triggered the businesses to protest the hike. The hike dealt a serious blow to the country’s industrialisation, especially for the readymade garments.

Many of the apparel manufacturing factories rely on captive power – transforming the gas into power in factory-based power plants – for production. There have already been discussions on whether LNG could be an energy alternative, but fears are on that it would be costlier. And, their fears are not based on wild assumptions either.

There is an existing discussion that the prices of gas might rise further after price balancing for the costly LNG imports. Though nothing has been finalised yet, insiders in Bangladesh’s state-run petroleum handler Petrobangla say that the price of gas might get pushed up to almost double of what it is now.

In a recent interview to the media, State Minister for Power, Energy and Mineral Resources, Nasrul Hamid has also hinted that there might be price hiking of gas for price balancing. However, from his end, there was no indication as to when it might happen or how much will the prices increase.

Also, from the manufacturers’ perspective, LNG will not be just plug-and-play, like in the case of supply gas, to their captive power plants. For LNG, companies have to invest more in LNG pumping and vessel transportation.To use the LNG, the industry has to ensure new setup for using these facilities. However, the question of whether the manufacturers would lose the competing edge has not been addressed in the policy-level.

Faruque Hassan, senior vice president of BGMEA, says that the garment makers are open to all options. “There is no denying the fact that our growing industry needs more power. In my opinion, we need LNG, natural gas and electricity as power. But, we must keep in consideration the cost of our energy. If our production cost increases, we will not be able to maintain the advantage of low-cost production worldwide, and our industry will fall.”


A big chunk of Bangladesh’s gas consumption in the garments industry is done in the textile industry – the backward linkage that Bangladesh has created for its garments industry for adding value to the supply chain. Gas is mainly used for the captive power plants and boilers these textile factories use for producing yarn – the prime ingredient of Bangladesh’s garments industry.

According to factory insiders, though there is no concrete statistics, Bangladesh’s apparel products are over 75 per cent reliant on the natural fibre cotton. The annual demand of yarn in the country is about 2.1 million tonnes. About 35 per cent of yarn is imported, mainly from India, China, Vietnam and Pakistan. The remaining 65 per cent, Bangladesh’s textile millers say, they produce in country.

And, 99 per cent of all that yarn is imported from outside, which has placed Bangladesh as the biggest cotton importer in the world, pushing China, the largest apparel manufacturer, in the background. This effectively means that the raw material for apparel production is largely dependent on the global cotton prices.

In this perspective, Bangladesh’s apparel manufacturers are currently left with influence over very little factors of production – namely the logistics, labour cost and energy prices. On top of all this, the added import of LNG will push the dependency of yet another factor of production to vulnerability.

According to Mohammed Nasir, vice president (finance) of BGMEA, as he says, the country’s apparel manufacturers have suffered a serious setback in the last two years – counting an 18 per cent rise in cost of production – due to a variety of factors including gas price hike, logistics and other costs. It did not include any increase in labour cost which will be soon added after the new pay structure for the 3.6 million workers will come into play by the end of this year.

Monsoor Ahmed, secretary to Bangladesh Textile Mills Association, says that whether LNG can be considered as a sustainable energy supply will depend on the price factor and its supply. Sceptic on the impact LNG might bring, he said: “The main thing to consider here is if the industry can afford the LNG. But we must say, the inclusion of LNG and the concept of ensuring energy for our industries is definitely laudable.”


After speaking to a number of industry insiders and stakeholders, Apparel Resources has found out that there is a general consensus on accepting LNG as a long term alternative power source. But, there is a strong stand against the price hike.

“Of course we see it as a sustainable solution to the energy demand of our industry. But, it has to be kept in serious consideration that the prices are kept at a tolerable level. Otherwise, we will lose our competitiveness in the global market,” BGMEA Vice President (inance) Mohammed Nasir says.

Faruque Hassan, senior vice president of BGMEA, echoed similar concerns over price hike of gas and added that, if necessary, the government can think of other ways to compensate the apparel industry. “The government can think of providing subsidies or any other indirect means of compensation as the Indian government does for its apparel industry. The government can withdraw the source tax (which currently stands at 0.7 per cent for the apparel makers) for garment factories. The corporate tax can also be reduced (which currently stands at 12 per cent).”

One thing has been absolutely clear from what the apparel makers have to say, the sustainability of LNG itself as a sustainable energy source depends mostly on whether Bangladesh Government can maintain a harness on the supply and pricing of the costly import item.