Fuel supply: Strong response from alternative sources, but delay fears remain

Since the outbreak of war in the Middle East, the government has been striving to import oil and gas from alternative sources. Although many suppliers initially showed interest, firm commitments for assured supply have so far been limited. A similar uncertainty persists in the import of liquefied petroleum gas (LPG) both in the public and private sectors. As a result, concerns over fuel supply in the coming days remain unresolved.

Bangladesh relies heavily on the Middle East for oil and gas imports. Following the start of the war on 28 February, imports through the Strait of Hormuz from the Persian Gulf region effectively came to a halt. This prompted efforts to identify alternative sources in both sectors.

However, the situation has become more challenging as other import-dependent countries like Bangladesh are pursuing the same strategy. Although Iran has stated that Bangladeshi vessels carrying fuel will be allowed to pass through the Strait of Hormuz, ongoing attacks on energy facilities in the Middle East have made it uncertain when supply conditions will return to normal.

According to data from the National Board of Revenue, in the first eight months of the current 2025-26 fiscal year, 80 per cent of crude oil, 65 per cent of liquefied natural gas (LNG), and 51 per cent of LPG imports came from the Middle East. Moreover, although a significant portion of refined diesel is imported from various Asian countries, those countries also depend on Middle Eastern crude oil. Consequently, any contraction in Middle Eastern supply has also affected alternative sources.

Speaking to Prothom Alo Friday, state minister for power, energy and mineral resources Aninda Islam said the duration of the ongoing war remains uncertain. This uncertainty has already affected the global fuel market. Disruptions in supply chains have created a fuel crisis worldwide, placing pressure on import-dependent countries such as Bangladesh.

The state minister added that the government is currently prioritising the maintenance of supply. To this end, initiatives have been taken to import oil and gas from alternative sources alongside conventional ones. Discussions are ongoing with multiple companies from various countries to ensure that supply shortages do not occur. In other words, the government has adopted a strategy to continue procuring fuel even if market prices rise.

However, the cost of fuel imports is increasing, putting additional pressure on foreign currency reserves. Aninda Islam said that despite rising costs, there are currently no plans to increase the prices of diesel, octane, or petrol. This indicates that the government intends to absorb the impact of rising international prices rather than passing it directly on to consumers.

To sustain this position, the government is also exploring alternative financing options. The state minister noted that efforts are underway to manage the additional costs through loans from various sources. He added that the government will try to avoid increasing fuel prices for as long as it is financially feasible.

The Bangladesh Petroleum Corporation (BPC) is the country’s sole state-owned entity responsible for importing fuel oil. Typically, refined fuel is imported through government-to-government (G2G) agreements and international tenders. However, amid the current instability, the organisation has moved to procure oil through direct purchase in order to maintain normal supply. To this end, discussions are underway with at least 11 companies from various countries.

So far, the government has approved purchases from two companies that have confirmed supply. As much as 100,000 metric tonnes of diesel will be purchased from AP Energy Investments Limited, which has offered a discount of USD 3 per barrel. In addition, Hong Kong-based Superstar International (Group) Limited will supply 200,000 tonnes of diesel, offering a discount of up to USD 40 per tonne compared to Platts pricing.

Notably the global fuel oil market is largely centred around two hubs - Singapore and the United States. BPC generally follows benchmarks set by S&P Global Platts when purchasing fuel. Prices are determined by averaging rates over a five-day window: the two days before loading, the day of loading, and the two days after, to fix the per-barrel cost.

According to BPC sources, work orders have also been issued to Petrogas International and A&A Energy Oil and Gas. Among them, A&A Energy Oil and Gas has proposed supplying 200,000 tonnes of diesel from Kazakhstan at a price of USD 75.17 per barrel, which is lower than current international market rates. However, BPC has not yet received firm assurance regarding this shipment.

Meanwhile, Petrogas International has proposed to supply 100,000 tonnes of diesel and 25,000 tonnes of octane, offering a discount of USD 3 per barrel against the Platts benchmark.

In addition, the international engineering and energy infrastructure service provider BJN Group has proposed to supply 300,000 tonnes of diesel, quoting a price of USD 79.09 per barrel. The Dubai-based trading company IL Tech Ventures has expressed interest in supplying 30,000 tonnes of diesel, with a proposed price of USD 194.58 per barrel. Meanwhile, the Oman-based company Maxwell International SPC has proposed to supply 100,000 tonnes of diesel every two weeks, with its offer including a discount of USD 15 per tonne.

BPC sources further noted that four other companies on the list have yet to submit final price offers, and proposals will be sought from them as well. A decision will be taken after reviewing all submissions.

Two reliable BPC officials, speaking on condition of anonymity, said that while many companies are showing interest, there is limited certainty about whether supply can be ensured within the required timeframe. Many have yet to provide clear delivery schedules. As a result, alongside seeking alternative sources, supply planning has had to be repeatedly adjusted.

A similar situation arose in 2022 following the outbreak of the Russia-Ukraine War, when Bangladesh faced a fuel crisis. At that time, the government took initiatives to import fuel from multiple alternative sources, and several international companies expressed interest in supplying oil. However, in the end, none could guarantee delivery. That past experience continues to weigh on stakeholders as they consider reliance on alternative sources once again.

*More to follow...