The Financial Express
Swasti Lankabangla Swasti Lankabangla

Govt's 'lethargic' approach doubles consultancy cost

| Updated: August 11, 2020 09:44:13

- Picture used for illustrative purpose - Picture used for illustrative purpose

The 'lethargic' approach by the government in building the country's second crude oil refinery has more than doubled the consultancy cost to around Tk 2.56 billion, it has been alleged.

The government approved recently the extension of contracts with India's oil consultant Engineers India Limited, or EIL, by four more years to build the new refinery in Chattogram with an annual capacity of 3.0 million tonnes.

The cabinet committee on public purchase approved the extension of the contract period with the EIL recently, a senior energy ministry official told the FE on Saturday.

As per the initial contract, the EIL was supposed to carry out the consultancy in three years until April 2019 at a cost of Tk 1.10 billion, or US$14.03 million.

But the EIL could execute only 20 per cent of the assigned work as it had no work in hand due to dilly-dally of the authorities concerned, insiders said.

In April 2016, the Bangladesh Petroleum Corporation (BPC) appointed the EIL as the management consultant to facilitate building the crude oil refinery.

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

The EIL was responsible for overall supervision of the implementation of the new refinery in Chattogram, a senior BPC official added.

But the BPC is yet to initiate the process to select an EPC contractor for the refinery.

It neither floated any tender to select the EPC contractor through competitive bidding nor successfully negotiated with any interested one.

The 'inaction' by the BPC to select the EPC contractor has lingered the job tenure of the India's EIL, the official added. Officials said that so far selecting of an EPC contractor remained stuck in discussions only.

French firm Technip had proposed the BPC to build the country's second crude oil refinery at an estimated cost of US$ 2.23 billion. But the EIL opined that the cost might be significantly lower, if it is built through tendering.

The Indian consulting firm has estimated that the cost might be around $1.80 billion if the EPC contractor is selected through competitive bidding. The project cost is expected to be provided by the government and the BPC.

Technip carried out the front-end engineering and design, or FEED, for the refinery, which is already reviewed and accepted by the BPC after having consultation with the EIL.

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

Sources 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.

BPC officials said, 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 purchased land for the refinery at Tk 2.30 billion from the Ministry of Industries.

A consortium of three French companies, led by Technip, had installed the first unit of the ERL, which is also the country's sole refinery. The first unit started commercial operation in 1968 with an economic life of 30 years.

The first unit is, however, still in operation having a de-rated capacity of around 1.4 million tonnes.


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