ERL second unit construction to start this year with state funding

CHATTOGRAM, Oct 24: The government is set to complete all the required processes to begin the construction of the long-delayed ERL Unit-2 by December 2025.

The proposal is now waiting for approval from the Executive Committee of the National Economic Council (ECNEC). However, the design work of ERL 2 is almost completed.

After canceling deals with the S Alam Group as a partner with the Eastern Refinery Limited (ERL), the existing Development of Project Proposal (DPP) for the construction process of the second unit of ERL is progressing quickly under the state-owned Bangladesh Petroleum Corporation (BPC).

The project will now be funded by the government itself, as per the previous decision.

Chairman of The BPC, Md Amin Ul Ahsan confirmed at a press conference at ERL recently that the government has finally decided to construct ERL Unit-2 with state funding, moving away from its earlier plan of seeking foreign investment.

In an interview with The Financial Express, the new Managing Director of ERL, Engineer Sharif Hasant, said, "The infrastructural construction of the project will begin only after the required funds are secured."

He also stated that there was no uncertainty about the project.

"The interim government is considering the project as high priority as it is very important for Bangladesh," he further said.

He added, "The concerned ministry, BPC, and ERL have already cancelled the proposal and deal with the S Alam Group as a partner with ERL. Now, the project will be implemented with its own funds.

Earlier, the government of Bangladesh had allocated 70 per cent of total funds as a loan, while the remaining 30 per cent will be allocated by BPC." The 2nd unit of ERL will be set up using state-of-the-art technology to refine various types of crude oil, including Russian crude oil.

The country's only state-owned refinery, ERL, does not have the capacity to refine Russian crude, but when the project of the 2nd unit of ERL is completed, Bangladesh will be able to import and refine an additional three million tonnes of eco-friendly Euro 5 fuel oil per year, saving USD 9-10 per barrel in refined fuel considering current international market prices.

The feasibility study report of the 2nd unit of ERL showed annual savings of USD 237 million with about USD 11 in savings per barrel.

The 2nd unit of ERL will be able to meet 100 per cent of the current demand for jet fuel and gasoline. Fuel oil can be exported after meeting local demand.

Officials of ERL said the production of two new petroleum products, including lube base oil and sulfur, will be possible at the 2nd unit of ERL.

The project of the 2nd unit of ERL was sanctioned by the government in 2014 under the Quick Enhancement of Electricity and Energy Supply (Special Provision) Act, 2010.

In 2013, the cost of the project was estimated at Tk 130.00billion.

Last year, the BPC sent the proposal to the Planning Commission to get approval for implementation with its own funding. The project expenditure was then proposed at Tk 197.69 billiun, which has now increased further to Taka 237.46 billion.

Concerned ERL officials said that the additional cost has been estimated due to a rise in the dollar rate and prices of construction materials.

It may be mentioned that the process of the second unit of ERL, the state-owned lone oil refinery of the country, which started in July 2018, is continuing now. The present Crude Oil processing capacity of ERL is 1.5 million MT per year.

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