Delay means double the cost

It is unfortunate for Bangladesh that the majority of the critical infrastructures inevitably end up being delayed. The latest to fall foul to this trend is the single-point mooring (SMP) project launched in 2015 and was slated to be completed in 2018.  The three-year project is now gong to take nine years to complete with project cost nearly doubling. The latest extension has the cost rising to Tk82.98 billion, and now the project is slated to be completed in December 2024. The project titled "Installation of Single Point Mooring (SPM) with Double Pipeline", taken up in November 2015 with a cost of Tk 49.35 billion, was supposed to be completed in December 2018.

The idea of setting up the SPM by Eastern Refinery Limited (ERL) was to bring down the cost of transporting fuel oil from vessels at outer anchorage (deep sea) through pipelines. This would forgo the use of lighterage vessels, thus significantly cutting down transportation costs. The project would save the government an estimated Tk8.0 billion annually. Interestingly, nearly 66 per cent of the work on the SPM was completed by 2021. The Bangladesh Petroleum Corporation chairman had gone on record saying, "We're expecting to initiate the operation of the SPM project by August 2022".

The project cost was slated at T65.68 billion, of which the government was footing Tk12.19 billion, the BPC 6.85 billion and the rest Tk46.63 billion coming as project aid. The project work entailed construction of 135km offshore pipeline and 58km onshore pipeline which had already been installed. Indeed, going by reports published in the media, construction of pumping station is now complete and six storage tanks are nearing completion. Three out of six storage tanks would be able to store 50,000 cubic-meters of crude oil while the remaining three had 30,000 cubic-meters capacity.

Once SPM is constructed, the Bangladesh Shipping Corporation and some private companies stand to lose business. Today the BPC pays US$5.50 per tonne to lighterage vessels to ferry petroleum to its onshore tanks from larger mother vessels. The SPM would save this money. There is also a significant time saving in the equation. The SPM, as BPC estimates, would enable unloading of petroleum products from a 100,000-deadweight tonnage tanker within two days, which currently takes 11 days. Every year the country imports an estimated 6.0 million tonnes of crude and 1.3 million tonnes of refined petroleum products.

When the project was undertaken in 2015, the conflict in Europe was not in sight. The war has already dragged on for two years and no one knows how protracted it will be. While the rest of the world moved heaven and earth to take advantage of discounted oil that became available on international markets, Bangladesh has been dragging its feet on projects like SPM. Excuses can always be found on how to delay project timelines and escalate costs. The SPM was delayed for the third time to June 2023 entailing cost escalation by 44 per cent from initial cost estimate. Back then, it was stated by SPM officials that "installation of more than 214km of the 220km pipeline had been completed."

This situation begs the question as to why the authorities initiate projects without doing proper feasibility studies that would give policymakers an idea of time and cost overruns an endevour like this is likely to encounter. For years and multiple projects later, the country's planners have yet to find effective ways to manage projects. Perhaps it works to the advantage of companies to have these delays that will entail multiple time extensions resulting in continual project cost revisions (upward). Of course, the financial benefits accrued from such "extensions" is allegedly shared by all concerned and that has been the modus operandi for decades. Needless to say, the SPM would curtail a lot of business currently being done by a handful of operators and perhaps that is why the project has been on the slow lane.

The latest extension approved by the Executive Committee of the National Economic council (ECNEC) takes SMP project completion to December 2024. The first revision increased cost to Tk54.26 billion (time line extended to December 2019). Second extension came when it became clear SPM wouldn't be completed and delayed project completion to December 2022 with project cost rising to Tk65.68 billion. The ERL asked for and got a further time extension to December 2023 with cost escalation ballooning to Tk71.24 billion and now the latest (and hopefully the last) extension approved last week will take the total cost of SPM to Tk82.98 billion!

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