Further delay likely as interim govt also moves slowly

Bangladesh's delay in constructing its first crude-oil refinery after independence is set to linger further as the interim government is also in the slow lane to implement the project like the previous ones.

Bangladesh had "failed" to build any crude-oil refinery over the past half a century after its independence, resulting in huge waste of foreign currencies that went into the import of refined oils from the international market, market insiders said.

Only "negligence" on the part of the authorities concerned is to blame, they added, in an indication of the dominance of rent-seeking import lobbies.

The country's currently operational maiden refinery - Eastern Refinery Ltd (ERL) - was built way back in 1968 by French company Technip, three years before the emergence of independent Bangladesh from the Pakistani rule.

The volume of petroleum oil imports increased around threefold over the past five decades to feed the growing consumption in transport, industries, and other commercial outlets with the expansion of the country's overall economy.

The feasibility study, conducted by Engineers India Limited (EIL), has confirmed that the entire investment will be recovered in less than seven years, banking on an internal rate of return (IRR) of 16 per cent, once a new crude-oil refinery having the capacity of around 3.0 million tonnes per annum is built.

The Front End Engineering Design (FEED) report, prepared by Technip, reveals that the new refinery will help save $19 per barrel of oil.

"We are searching for foreign funding to implement the project," Bangladesh Petroleum Corporation (BPC) Chairman Amin Ul Ahsan told The Financial Express Saturday.

"Once we get the funding, we shall float tenders to select an engineering, procurement and construction (EPC) contractor to implement the project," he said.

Market sources said the previous governments delayed implementing the project in the same fashion either for arranging funds or selecting the EPC contractor.

The Energy and Mineral Resources Division (EMRD) under the Ministry of Power, Energy and Mineral Resources (MPEMR) is trying to arrange funds from the Asian Development Bank (ADB), the Islamic Development Bank (IsDB), the Asian Infrastructure Investment Bank (AIIB), and the World Bank (WB).

As per the latest development project proposal (DPP), the project cost is estimated at Tk 364 billion. It has an annual refining capacity of 3.0 million tonnes.

The BPC is set to provide Tk 110 billion for the project, while the remaining Tk 254 billion is expected to be secured from foreign loans.

Sources said the MPEMR first decided to build a new crude-oil refinery at an estimated cost of Tk 130 billion in 2010 on the basis of a feasibility study funded by the IsDB.

The EMRD redesigned the DPP in 2023 with an estimated cost of Tk 237 billion through domestic financing due to the delay caused by the unavailability of foreign resources.

The proposal was later withdrawn from the Planning Commission to implement the project with funding from the controversial S Alam industrial group, and a memorandum of understanding (MoU) was inked with the acquisitive conglomerate - now in the wilderness following the fall of the past government through an uprising.

The current interim government cancelled the MoU with S Alam Group and decided to proceed with the new unit under a project of the Annual Development Programme (ADP).

The cost of the project increased by Tk 126 billion, or 53.40 per cent, over the past two years due to delays in the name of the PPP framework.

Compared to its 2010 estimate, the project cost increased 2.8 times, said sources.

The EMRD recently decided to implement the project titled "Modernisation and expansion of Eastern Refinery Limited (ERL)" with foreign financing and BPC's own financing.

State-owned ERL is currently capable of refining only 1.5 million tonnes of petroleum products against the country's annual fuel demand of about 7.0 million tonnes.

The ERL is meeting around 18.62 per cent to 23.92 per cent of the total petroleum-oil and -lubricant demand.

The project aims to boost refining capacity to 4.5 million tonnes per year by adding another 3.0 million tonnes.

The new plant will produce Euro-5-quality fuels, which include diesel, octane and petrol with a sulphur content of less than 10 parts per million (ppm), adhering to global environmental standards and promoting cleaner air for future generations.

Implementing this project would save foreign exchange by reducing dependence on imported refined petroleum.

In addition, the plant would help increase the income of BPC by processing various value-added by-products at affordable costs, alongside the production of liquid fuels from refining crude oils, reveals the project proposal.

Besides, the proposed refinery will serve as a "forward linkage" for the "Installation of Single-Point Mooring (SPM) with Double Pipe Line" project, which was built at a cost of around Tk 80 billion and is set to initiate commercial operations soon.

The SPM project has the capacity to transport 9.0 million tonnes of fuels annually, split equally between 4.5 million tonnes of refined fuels and 4.5 million tonnes of crude oils.

Until the new refinery is completed, two-thirds of the SPM's capacity regarding crude oil will remain idle.

The EMRD has projected that petroleum demand in the country will reach 11.45 million tonnes in the fiscal year 2023-31, with an average growth rate of 5.9 per cent in the next couple of years.

Once the second unit is commissioned, the ERL will be able to meet about 40 per cent of the national demand while its share will fall to just 13 per cent in the absence of the new plant.

"It is sheer negligence from the government high-ups as it could not build a new refinery even over the past 53 years," Energy Adviser of the Consumers Association of Bangladesh (CAB) Prof M Shamsul Alam told The Financial Express.

"A vested quarter having a nexus with government high-ups has been delaying the project's execution to earn money as commission," he said, in tune with usual quips over import preference.

"Consumers are the ultimate losers," he lamented.

Building the oil refinery through competitive bidding will ensure the execution of the project in a transparent and accountable manner, said energy expert Prof M Tamim, who was a special assistant of a previous caretaker government.

Azizjst@yahoo.com