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The Financial Express

New oil refinery: Indian consultancy could get one year extension

| Updated: March 16, 2020 10:49:28


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

Engineers India Limited, or EIL, is expected to get one more year to complete its consultancy work for building of a new crude oil refinery.

The state-run Bangladesh Petroleum Corporation, or BPC, has agreed to raise the project cost against consultancy of the Indian project management consultant firm by around 32 per cent to around Tk 1.46 billion.

The project completion period has also been extended by 12 more months to 48 instead of 36 months.

The negotiation requires approval from the cabinet committee on economic affairs, said a senior corporation official.

Engineers was appointed as the management consultant by the BPC in April 2016 to facilitate building the country's second crude oil refinery with an annual capacity of 3.0 million tonnes.

As per the agreement, 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 contractor, said a senior BPC official.

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

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

The contract expired in April 2019, but it executed only 20 per cent of the work.

But the BPC has yet to initiate the process of selecting an EPC contractor for the refinery.

It neither floated any tender nor did it successfully negotiated with any interested EPC contractor.

The inaction on the part of the BPC to select the EPC contractor has given the Indian consultancy scope for lingering, it is alleged.

Officials said French firm Technip has proposed the BPC to build the country's second crude oil refinery at an estimated cost of $ 2.23 billion.

But the Indian company said the cost can go down significantly, if it is built through tendering.

The Indian consulting firm has estimated the cost at 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, for the refinery, which is already reviewed and accepted by the BPC after having consultation with the EIL.

Technip carried out the engineering work at Tk 2.57 billion (US$ 32.10 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 to manage the project.

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

Once implemented, the new refinery eould 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.

The BPC and the government would provide necessary funding to implement the project.

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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