A total solution to jet fuel, gasoline demand in sight

Finally, the second unit of the Eastern Refinery Limited (ERL), which will help meet the total demand for jet fuel and gasoline in Bangladesh, gets all-clear for construction. The government has already allocated funds for the project and the construction will begin very soon.

The interim government has decided to construct the 2nd unit of ERL with its own fund. It has cancelled all proposals and deals of the S Alam Group for being a partner with refinery. In a meeting of the concerned ministry held in November, the proposal of the S Alam Group for being a partner with the ERL was cancelled finally. As a result, the project will be implemented by the government as per previous decision.

Talking to THE FINANCIAL EXPRESS, ERL Managing Director Engineer Sharif Hasnat said, "Concerned ministry, Bangladesh Petroleum Corporation (BPC) and ERL already cancelled the proposal and deal of the S Alam Group for being partner with the ERL. So, there is no chance of S Alam to be partner with ERL 2nd unit. Now, the project will be implemented with own fund, with international loan."

"The interim government is considering the project as a fast-track one as the project is very important for Bangladesh," he said.

"Bangladesh government has already allocated funds for the project. The Government of Bangladesh has allocated 70% of total funds as loan while the remaining 30% will be allocated by Bangladesh Petroleum Corporation (BPC)," he added.

He said, "We have finalized the Front in Engineering Design of the second unit. We are waiting for approval of the DPP (draft project proposal) and inviting tenders for the project."

He said, "In order to ensure energy security of the country, the Government of Bangladesh has accepted the construction of Unit-2 Project of ERL having 3.0 million MT of crude oil processing capacity. The present crude oil processing capacity of ERL is 1.5 million MT per year. On implementation of the Unit-2 project, the crude oil processing capacity of ERL will increase to 4.5 million MT per year and it will bring in the much-needed equilibrium between demand and supply of petroleum products in the country. It will also ensure production of eco-friendly motor gasoline and diesel oil and will ensure the energy security of the country."

The 2nd unit of ERL will be set up using state-of-the-art technology to refine various types of crude oil, including Russian crude oil. The country's only state-owned refinery ERL has not the capacity to refine Russian crude. But, when the project of 2nd unit of ERL will be completed, Bangladesh will be able to import and refine an additional three million MT of eco-friendly Euro 5 fuel oil per year, saving USD 9-10 per barrel in refined fuel, considering current international market prices.

The feasibility study report of the 2nd unit of ERL showed annual savings of USD 237 million with about USD 11 in savings per barrel. The 2nd unit of ERL will be able to meet the total current demand for jet fuel and gasoline. It will be possible to export fuel oil after meeting the local demand.

Production of two new petroleum products-lube base oil and sulfur-will be possible at the 2nd unit of ERL. Once the project is implemented, Bangladesh will be able to import and refine an additional 3 million MT of eco-friendly Euro 5 fuel oil per year, saving USD 9-10 per barrel in refined fuel, considering current international market prices.

The ERL 2nd unit project was sanctioned by the government in 2014 under the Quick Enhancement of Electricity and Energy Supply (Special Provision) Act, 2010. In 2013, the cost of the project was estimated at Taka 130 billion (13,000 crore). Last year, the BPC sent the proposal to the Planning Commission to get approval for implementation with its own funding. The project expenditure was then proposed at Taka 197.69 billion (19,769 crore). The cost has now increased further to Taka 237.46 billion (23,746 crore) due to the rise in the dollar rate and prices of construction materials. However, the design work on the ERL 2 is almost completed.

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