The Bangladesh Petroleum Corporation (BPC) looks to enter into an agreement with the Indian Oil Corporation Ltd. (IOCL) to import diesel using waterways.
Officials of both the state-run entities of the two neighbouring countries will discuss the issue soon to initiate oil trading through waterways under a government-to-government (G-to-G) agreement.
The BPC currently imports petroleum products from different state-run oil suppliers under G-to-G deals and from other oil suppliers through tenders.
Recently, the IOCL has offered to export around 5,000 tonnes of diesel to Bangladesh a month using waterways.
It intends to supply the fuel oil to the BPC's newly built oil depot at Mongla, which have a storage capacity of around 100,000 tonnes.
Presently, Bangladesh imports around 4,400 tonnes of diesel every month from Numaligarh Refinery of Assam, owned by Bharat Petroleum Corporation Ltd. (BPCL), a state-owned Indian oil company.
If the IOCL starts exporting diesel, the total volume of India's export of diesel to Bangladesh would stand at around 9,400 tonnes.
The IOCL has offered to supply diesel at a premium rate of US$ 1.51 per barrel if the petroleum product is imported on FOB (free on board) basis, meaning the BPC would have to bear the transportation costs.
On the other hand, the premium rate would be US$5.27 per barrel if the petroleum product is imported on CFR basis, meaning the IOCL would have to carry the petroleum product to Mongla oil depot at its own expense.
In that case, the BPC would have to pay the fuel import cost as per the mean of Platts Arab Gulf (MoPAG), a benchmark formula in fixing oil prices in international market.
As per fuel specifications, the IOCL's diesel will have 0.05 per cent sulfur content at the maximum.
The IOCL has a plan to use lighter vessels to transport the fuel oil from its Haldia refinery in West Bengal to Mongla.
Currently, the BPC is carrying fuel oil from Chittagong oil depot to Mongla depot.
BPC has been importing diesel from Numaligarh refinery to its Parbatipur oil depot using railways since October 2017.
Presently, the BPC has been importing the fuel oil in two consignments -- 2200 tonnes in each consignment -- every month.
The BPC pays a premium rate of US$ 5.50 per barrel on CFR basis to import Indian diesel from the Numaligarh refinery.
Indian diesel is being consumed by clients around Parbitupur localities.
To meet the domestic demand, the BPC imports around 4.5 million tonnes of gasoil annually.
About a decade back, the BPC had imported diesel of a small quantity of 3,500 tonnes from the BPCL for a brief period in 2007.
The BPC had also imported around 400,000 tonnes of diesel from the IOCL during 2005-06.
Separately, the BPC and the BPCL are working together to build a 130-kilometre cross-country pipeline to trade diesel.
The BPCL will bear the entire costs for the construction of the pipeline and the BPC will import diesel through the pipeline for at least 15 years.
The premium rate for importing diesel through this pipeline would be $ 5.50 per barrel on CFR basis.
The state-run Bangladesh Power Development Board (BPDB) will build a 150 megawatt (MW) diesel-fired power plant at Saidpur by 2020 and the diesel would be imported through the proposed 130 km cross-country pipeline.
Around 150,000 tonnes of diesel would be required for the plant annually.
The demand for diesel in 16 northern districts of Bangladesh is around 1.10 million tonnes.