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Bangladesh now goes for building a new refinery after Eastern Refinery Ltd's lone outmoded unit proved incapable of refining crude to be imported for navigating the current oil crisis, officials have said.
However, sources said Friday, the government is going to endorse refinery-construction project for ERL while installing an oil-unloading pipeline from the Bay of Bengal has been stalled for seven years.
To make up for the country's poor oil-refining capacity, the state-owned ERL under Bangladesh Petroleum Corporation (BPC) has taken up the 3.0-million-tonne-capacity refinery project.
The cost is as much as Tk 197.69 billion, proposed to be spent entirely from government's internal resources, the sources said.
The BPC recently sent a development project proposal (DPP) to the Planning Commission (PC) for its seal of approval.
Meanwhile, the ERL management couldn't complete the ongoing Tk 65.68 billion 'Single-point mooring (SPM) with double pipeline' project in last seven years although the country is struggling in oil unloading at the Chittagong seaport due to lower draft in the channel.
The ERL unit was set up with a capacity of 1.5 million tonnes way back in 1968. After this lone plant, there has been no refinery set up although Bangladesh's fuel-oil demand has mounted.
Currently, Bangladesh's annual oil demand is around 9.5 million tonnes, including around 1.50 million tonnes of crude oil.
Apart from the total BPC imports of around 6.5 million tonnes of refined and crude oils combined, the private sector imports around 3.0 million tonnes of furnace oil.
"Since Bangladesh is struggling with poor oil-storage capacity, we are going to install 3.0-million-tonne- capacity refinery unit-2 on the ERL site in Chittagong," says an Energy and Mineral Resources Division official.
"As per our consultant report, we have taken up the unit-2 project with a cost of Tk 197.69 billion," he adds.
The second unit will enrich Bangladesh's oil-refinery capacity to 4.5 million tonnes a year.
Meanwhile, BPC appointed Technip, a French engineering company, for Front End Engineering Design (FEED) at a cost of Tk3.72 billion for the proposed ERL unit-2. The contract with the firm was signed in January 2017.
Based on the FEED report, the proposed Tk 197.69 billion project for the oil refinery unit-2 has been taken up.
Bangladesh's current poor oil-refinery capacity has already affected its reserve and created extra pressure on the foreign-exchange reserves amid global price spiral.
The global supply-chain disruptions by the Covid pandemic and the Russia-Ukraine war in the supply hub have already affected Bangladesh as its crude-oil refinery is still in a shambles.
The country needs to import high-cost refined oil from the international market which is now maintaining a massive volatile trend.
As such, the impoverished refining system failed to cash in on the offer of cheap Russian heavy crude oil as the old refinery, ERL, does not have the capacity to refine heavy crude. The ERL unit only has the capacity to refine light crude as it is so old.
Crude price on the international market is relatively cheap, and sometimes the price of refined oil more than doubles that of the crude oil, market-insiders say.
A new crude refinery could reduce the import of refined oil both by BPC and the private sector, insiders say.
It could help the government pay less to privately owned furnace oil-fired power-plant sponsors.
The government has been providing 9.0-percent on top of their furnace oil-import costs as 'incentives' for over the 12 years since 2010.
According to the newly proposed Development Project Proposal (DPP), the Tk 197.69 billion ERL unit-2 project will be implemented between now and June 2027.
A BPC official said Friday they would install the ERL unit-2 as the front-end project of the currently executing SPM with double-pipeline scheme.
"We will import crude which will be unloaded from the Bay through the SPM pipeline and come to the proposed ERL unit-2 for refining. Then the country will get supply of the fuel adequately all the year," the official said.
Currently, Bangladesh is implementing austerity measures shutting all diesel-fired power plants and embracing load-shedding amid planet-wide hot spell.
Commercial banks are also asked to ensure austerity by reducing consumption of diesel along with natural gas and lubricants by 20 per cent within next one year.