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The Financial Express

Bangladesh government finally goes for bidding for second oil refinery

| Updated: January 23, 2022 16:47:13


Bangladesh government finally goes for bidding for second oil refinery

The government has finally decided to select through competitive bidding a contractor for construction of the country's second crude fuel oil refinery.

The decision comes six years after taking up the project to build the plant in the port city of Chattogram, sources said.

Eastern Refinery Ltd, a wholly owned subsidiary of BPC, will implement the project having an estimated refining capacity of 3.0 million tonnes annually.

The sources said the government has taken more than one year after an Indian consultant's recommendation for launching the bidding process, instead of selecting a contractor by-passing tender.

However, state-run Bangladesh Petroleum Corporation (BPC) has been in a dilemma over the mode of selecting a contractor since 2015, when a memorandum of understanding was signed between the BPC and a French firm, Technip.

"Now we have decided to select an engineering, procurement and construction (EPC) contractor through a competitive bidding," state-run BPC chairman ABM Azad told the FE on Saturday. "An international tender will be floated soon."

Previously, the BPC was in talks with Technip over the past several years to build the refinery through a negotiation, by-passing tender.

Technip, the contractor of the ERL's existing refinery, was interested to build the proposed refinery under an unsolicited deal. The BPC now has, however, ceased the negotiation with the French company.

"The terms of Technip, as proposed to the BPC, were not deemed suitable for us," said the BPC top brass, explaining the cause of terminating the negotiation.

Insiders said Technip had proposed in the latest an estimated cost of US$2.23 billion, around 20 per cent lower than its previous offer of around $2.80 billion.

But the Indian consulting firm, Engineers India Limited (EIL), opined that the cost might be significantly lower if it is built through an open and competitive tendering process.

The EIL estimated that the cost might be around $1.80 billion if the EPC contractor is selected through a competitive tendering system.

The government and BPC are expected to bear the project cost.

The contract tenure of IEL has already been extended by four more years totaling it to seven years due to the delay in selecting the mode of contractor and other relevant issues, it has been alleged.

Consultancy cost has also more than doubled to around Tk 2.56 billion as a consequence.

The front end engineering and design (FEED) for the refinery, however, has been completed.

Technip carried out the FEED work, which had been reviewed and accepted by the BPC after having consultation with the EIL.

Technip carried out the engineering work for the proposed refinery at a cost of Tk 2.57 billion (US$ 32.10 million).

As per the agreement, EIL had to conduct a feasibility study on the refinery, decide on the plant's configuration and help the BPC select an EPC contractor, said a senior BPC official.

The EIL is responsible for overall supervision of the implementation of the new refinery in Chattogram, the official added.

The contract value is Tk 1.10 billion (US$14.03 million).

Officials said the project was initiated in 2015 and a memorandum of understanding was signed on November 11, 2015 between the BPC and the Technip.

To expedite the project work, the BPC on April 19, 2016 assigned the Indian consultancy firm to manage the project.

The BPC on January 18, 2017 assigned Technip to carry out the design work for the proposed refinery.

After completing the engineering and design work, Technip had proposed to build the refinery.

Chinese Sinopec had tagged as a partner with Technip to jointly build the refinery, said sources.

Sinopec also had completed preliminary negotiations with Technip to build a consortium for the construction, where Technip would be in the lead.

Once implemented, the new refinery could help the country save $220 million every year, trebling the country's

crude oil refining capacity to 4.5 million tonnes from the existing 1.5 million tonnes per year.

Currently Bangladesh imports around 6.50 million tonnes of crude and refined petroleum products a year to meet the local demand.

The BPC already purchased land for the refinery at Tk 2.30 billion from the ministry of industries.

The refinery can enable the country to process any kind of crude oil and become an exporter of the refined petroleum products. Nepal has already shown interest to import the products from Bangladesh.

The surplus finished petroleum products can be exported to Sri Lanka, Bhutan, Myanmar and the north-eastern parts of India as well, said officials.

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