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Opportunity to save $250m a year on petroleum missed

Columns 2022-08-03, 9:08pm


Jehangir Hussain

Jehangir Hussain

Bangladesh has missed the opportunity to save annually around $250 million by  importing less and export refined petroleum as setting up a refinery remains stalled.

If the refinery with the capacity to refine 3.0-million tonnes of crude was built t in time, the country’s expenditure on diesel and other petroleum products could be significantly cut down, Bangladesh Petroleum Corporation (BPC) officials said.

It would also have enabled Bangladesh in having stronger foreign-currency reserve during the current global volatile energy market.

Due to the stalled refinery, Bangladesh is passing through fuel and foreign-exchange crunch like many other countries in the wake of global supply-line disruptions caused by pandemic and Russia-Ukraine war.

If the refinery was built in time, Bangladesh could earn foreign currency by exporting  refined petroleum products to Sri Lanka, Myanmar, Nepal and Bhutan, said official.

Bangladesh could also import Russian crude on offer at less price they said.

Obviously, Bangladesh lost the opportunity of importing  Russian 'heavy crude' at discount.

The country’s age-old  Eastern Refinery Ltd (ERL) does not have the capacity to refine heavy crude, said the officials.

The ERL can refine only light crude.

State Minister for Power, Energy and Mineral Resources Nasrul Hamid  said earlier that in May, Russia had offered to sell to Bangladesh crude when the price of Brent crude was hovering high around $113 per barrel.

Now, Bangladesh has to make additional expenditure to pay Engineers India Limited (EIL) an Indian project-management consultant appointed for building the crude refinery, said officials.

in 2021, the government extended IEL’s contract tenure by four more years, totalling seven years, due to the delay in building the refinery, they said.

The cost of consultancy has also more than doubled to around Tk 2.56 billion as a result, they said.

Energy experts blamed  private sector importers furnace oil for the stalling of the refinery.

If the refinery was built in time, the country’s crude-refining capacity would have increased to around 4.50 million tonnes per annum from the ERL’s around 1.50 million tonnes.

Bangladesh's annual  demand of oil is around 9.5 million tonnes, including around 1.50 million tonnes of crude.

BPC imports around 6.5 million tonnes of refined and crude oil while the private sector imports around 3.0 million tonnes of furnace oil each year.

Since 2010, the government has been bearing nine per cent of furnace oil-import costs as 'incentives'.

In 2015, the move for building the new refinery was taken to increase the refining capacity by three times.

It was also in 2015, that a memorandum of understanding was signed between the BPC and French firm Technip, which carried out the front-end engineering and design (FEED) for the refinery at a cost of Tk 2.57 billion equal to $32.10 million.

in April 2016, BPC assigned the Indian consultancy to manage the project.

In January 2017, BPC  appointed Technip to carry out the FEED work of the  refinery.

But the government could not select the contractor to build the refinery.

The government is implementing load-shedding.

Commercial banks have been asked to ensure austerity by reducing consumption of diesel along with natural gas and lubricants by 20 per cent over the next one year.

Sources said a consortium of three French companies led by Technip had installed the first unit of the ERL, the country's lone refinery in Chattogram. In 1968, the ERL’s first unit began refining commercially.

It had 30 years’ life.

The first unit still refines at the reduced capacity of around 1.5 million tonnes.