Govt clears financing hurdle for Eastern Refinery 2nd unit

Eastern Refinery Limited (ERL) is poised to commence work on the second unit of its facility, following the resolution of financing issues that had long hindered progress.

The government has approved the exemption of its share of the project cost, clearing the way for development to proceed.

According to sources familiar with the matter, the finance ministry has agreed to provide a loan of Tk 16,142 crore to the Bangladesh Petroleum Corporation (BPC), representing the government's portion of the project cost. The BPC will finance the remaining Tk 6,916 crore from its own funds.

The five-year project is slated to conclude in June 2027, with BPC expected to repay the loan at an interest rate of 5% over the course of 20 years.

With financing now secured, ERL has submitted its Detail Project Plan (DPP) to the energy ministry for review. The ministry forwarded the proposal for allocation of funds to the finance ministry in November 2022, with the allocation approved this month.

The cabinet committee is expected to approve the DPP soon, after which work on the unit will likely begin within the next month.

According to Engineer Md Lokman, the managing director of ERL, "We have submitted the DPP and now it is in the planning commission. The finance ministry has allocated funds for the project now. We have already sent the DPP to the cabinet committee. The cabinet committee will finally approve the DPP and the work to set up the unit is likely to begin."

The design and layout plan for the second unit of the ERL has been completed, according to sources familiar with the matter.

France's Tecnip, the responsible company, has submitted the plan to the ERL authority, which in turn has sent the Detailed Project Plan (DPP), based on the design, to the ministry. Once approved, the BPC will initiate a tender process for the project.

"We have finalised the front-end engineering design of the second unit under Euro 5 standard. We are waiting for the approval of the DPP and calling for the tender of the project," said Mostafijur Rahman, the project director of the second unit of the ERL.

The formal process for constructing the second unit began in 2016, with construction starting in 2018. However, the project has yet to commence, despite several amendments being made to the DPP. The estimated cost of the project has also increased significantly, from Tk 13,000 crore to Tk 23,058 crore.

The second unit will have a refining capacity of around 3.0 million MT of crude oil per year. The BPC is currently in negotiations with Wuhan Engineering Company Ltd, a Chinese state-owned firm, to implement the project.

The current crude oil processing capacity of the ERL is 1.5 million MT per year, while the demand for petroleum products is nearly 6.5 million MT per year. The construction of the second unit, with a crude oil processing capacity of 3.0 million MT per year, is expected to address this imbalance and ensure the country's energy security.

[email protected]