Govt may get $1.2b deferred payment facility from KPC

The government is likely to manage deferred payment facility worth US$1.2 billion from the Kuwait Petroleum Corporation (KPC) for import of petroleum products, as the firm has agreed in principle of making such an arrangement, a top official said Monday. The KPC officials have assured the cash-strapped Bangladesh Petroleum Corporation (BPC) of discussing the deferred payment issue with their high-ups for final approval, BPC Chairman Md Abubakar Siddique told the FE. After managing deferred payment arrangement facility worth $1.50 billion from Malaysia's state-owned Petronas and the Philippine National Oil Company (PNOC), the BPC has recently proposed the KPC to extend the similar facility to it for smooth oil import, said the official. The BPC will be able to import petroleum products worth around $2.7 billion in total under deferred payment arrangement, if the KPC offers the facilities like Petronas and PNOC, said a senior energy ministry official. This will help avert fresh liquidity problem of the corporation to a large extent to import petroleum products in immediate future, he said. International Islamic Trade Finance Corporation, the lending arm of the Islamic Development Bank Group, has already agreed to provide $2.0 billion to the BPC, up by 37.93 per cent from the previous year's $1.45 billion, to import increased quantity of petroleum products for the next fiscal year (FY). The corporation has projected that it will require around Tk 460 billion ($6.21 billion) in the FY 2011-12 to import around 6.50 million tonnes of oil products to meet local demand. The BPC has already completed negotiation with the KPC to import 1.102 million tonnes of diesel and 210,000 tonnes of jet-fuel during the FY 2012. The corporation has agreed to provide higher premium rate - at $3.5 per barrel - over Mean of Platts Arab Gulf (MOPAG) assessments for diesel import, and $4.50 per barrel over MOPAG assessment for jet-fuel import. The BPC will require around $1.2 billion to import petroleum products during the fiscal. Earlier, in September, the BPC formally submitted a proposal to the KPC, seeking deferred payment facility for import of petroleum products. The BPC currently has deferred payment scheme with Petronas and PNOC for purchasing refined oil products for one year until September 2012. The corporation inked the deals in this regard early this month, though the deferred payment scheme has been effective since October 1. The deal can be renewed or extended, if necessary, the BPC chairman said. The interest rate for the deliveries during the first six months of the scheme (October 2011 - March 2012) was set at around 5.05 per cent per annum. The cash-strapped BPC will have six months to make payment upon receiving a cargo, but the interest rate of around 5.05 per cent will be charged only after the first month. Interest rate for the deliveries during the next six months (April - September 2012) is yet to be finalised. The corporation has been pursuing the KPC for the deferred payment arrangement, as it has been struggling to foot surging oil import bills following mounting import of oil products. The BPC purchases the oil products from the international market and sells them at lower prices in the domestic market, resulting in a substantial loss. To reduce the loss the government has raised domestic petroleum prices twice in the current fiscal - first in September and then in November. Despite the hikes, the corporation still faces a loss of Tk 16.39 against the sale of each litre of diesel and kerosene, and Tk 4.97 per litre against sale of furnace oil, the BPC officials said. The BPC has projected that it will require government funding against its loss of Tk 110 billion in the current fiscal, almost double than Tk 57 billion in the previous fiscal.