Bangladesh opens up investment by private sector in setting up refineries and marketing refined oil products both for domestic consumption and export, in a latest development aimed at unlocking energy-sector potential.
Officials said the Energy and Mineral Resources Division (EMRD) under the Ministry of Power, Energy and Mineral Resources (MPEMR) adopted a new policy and published a gazette notification to this effect last week.
Under the policy specifications, the annual capacity of a refinery has to be at least 1.50 million tonnes.
The refiners will be allowed to refine and market all types of refined petroleum products, like diesel, jet fuel, furnace oil, petrol and octane, having the standards set by Bangladesh Standards and Testing Institution (BSTI).
They will have to sell at least 60 per cent of their overall refined petroleum oil, including byproducts, to the state-run Bangladesh Petroleum Corporation (BPC) during initial three years of operations. The refiners will have the liberty to sell the remaining 40 per cent of their products through their own marketing networks during the period, the policy spells out.
"If the private refineries encounter challenges in selling their portion of the refined petroleum the BPC retains the option to purchase the surplus oil products from the refiners," says the policy.
The initial three-year gestation period over, the private refiners can market up to half of their output for subsequent two years.
After five years of operations, overall performance of the refiners will be reviewed to determine the quantity of oil products to be purchased by the corporation.
They will have to sell output at retail level at the rate fixed by the government or by the BPC to make sure the consumers at the user end gets the refined petroleum products at the same rate.
As decided, the private refiners will have to pay Tk 1.00 per litre to the BPC as margin against sales of all of one's refined products.
The private refineries can export refined output under their own arrangement on obtaining no-objection certificate (NOC) from the BPC, unless the corporation buys their products.
Importing crude oil from any country having international sanctions will be barred and the crude-import price must have similarity with the free-on-board (FOB) price of international Platts Rate as per its Crude Oil Marketwire publication.
The entrepreneurs are free to set up petrol pumps on roadsides and highways, in upazilas, and metropolitan areas to retail their produced fuel oil.
An entrepreneur must have at least three-year experience in energy-product manufacturing, marketing and plant operations, or its joint-venture partner or consortium must have at least five years of similar experiences.
An interested private enterprise must have a minimum annual turnover of Tk 50 billion (US$450 million) for any three out of previous five years and must have jetty facility to qualify for the big-budget venture.
Private entrepreneurs having own crude-oil sources, own vessels to carry crude and coastal tankers or tank-lorries to transport fuels will get preference in getting the go-ahead from the government.
One such private-sector entity will be required to have minimum 80 acres of land for setting up refinery.
Interested private entrepreneurs will have to pay Tk 10 million each to the BPC through pay order, which is non-refundable, during application.
After having final nod for setting up the refinery, the entrepreneur concerned will be required to provide bank guarantee worth Tk 2.50 billion in favour of the BPC as security deposit before commencing construction of oil refinery.
Bangladesh currently imports around 1.50 million metric tonnes of crude oils annually to refine in the country's maiden Eastern Refinery Ltd (ERL), a subsidiary of the BPC, cater domestic needs.
The corporation separately imports around 7.5 million tonnes of refined oil products combining diesel, jet fuel, furnace oil, octane and marine fuel.
"This is a very good initiative from the government as it will help ensure inflow of petroleum products in the country at affordable costs," executive director of Bashundhara Oil and Gas Company Ltd (BOGCL) Md Maksudur Rahman told the FE Tuesday.
Apart from BPC, the BOGCL, a subsidiary Bashundhara Group, owns a crude-oil refinery with an annual capacity of 2.20 million tonnes where it produces diesel, furnace oil, and bitumen and naphtha with an eye on local demand.
"We sell diesel to BPC, furnace oil to power-plant owners and naphtha and bitumen through our own networking system," says Mr Rahman.
Bashundhara has also a plan to build a new crude refinery having the capacity over 5.0 million tonnes in Chattogram.
Contacted in this context, Prof M Tamim aired fears that allowing same company to import crude oil, refine and sell might create a monopolistic scenario by private refiners.
"The government is creating an opportunity of making hefty profit by private sector as the cost of crude oil is far below the refined products in the international market," says the energy expert.
Currently BPC gains profit from its oil sale although the bulk of its imports consists of refined oil products, adds Mr Tamim, who was chief of the MPEMR during the previous caretaker government.
He suggests that the government allow import of refined oil products by private sector as well to ensure that the consumers get oil at affordable costs.
Azizjst@yahoo.com