The government has decided to import from January 2015 cleaner diesel having 0.05 per cent sulfur content instead of 0.2-0.25 per cent to ensure safe environment, a top government official said Thursday.
"We have already sent letters to the gasoil suppliers to ensure supply of better graded gasoil from day one of the next calendar year," state-owned Bangladesh Petroleum Corporation (BPC) Chairman Md Eunusur Rahman told the FE Thursday.
"We have not yet received response from the gasoil suppliers," said Mr Rahman.
The Department of Environment (DoE) under the Ministry of Environment and Forest (MOEF) earlier instructed the BPC to import cleaner diesel from January 2015, said a BPC official.
Bangladesh has been importing around 3.5-3.7 million tonnes of 0.20-0.25 per cent sulfur diesel over the past several years to meet the mounting domestic demand at the cost of around US$3.0-$3.5 billion, said a BPC official involved with specification of petroleum products.
The BPC is the lone importer of gasoil for Bangladesh and it has term deals to import diesel mainly from Kuwait Petroleum Corporation (KPC), Petco, the trading arm of Malaysia's Petronas, Emirates National Oil Company (ENOC), PetroChina, Vietnam's Petrolimex and Unipec Singapore Pte Ltd.
The BPC currently imports around one-third of total gasoil from KPC, which supplies 0.20 per cent sulfur diesel, said the BPC official.
"Importing upgraded gasoil might increase import costs," said the BPC official adding, "We will have to import it at the higher costs as per the MOEF instructions."
Apart from diesel, the BPC imports 180 CST high sulfur fuel oil (furnace oil), A-1 jet fuel, 95 RON gasoline (octane) and superior kerosene as refined petroleum products.
Separately, the BPC also imports around 1.4 million tonnes of crude oil from Saudi Aramco and Abu Dhabi National Oil Company every year for refining in its sole Eastern Refinery in Chittagong.
The BPC borrows money from the International Islamic Trade Finance Corporation, the lending arm of the Islamic Development Bank Group, to meet the major cost of petroleum imports. It purchases oil products from the international market and sells most of them at lower rates in the domestic market, resulting in significant losses.
The BPC is also eying syndication loans from some foreign banks and deferred payment mechanisms from its refined product suppliers, to finance its imports.
The company now has syndication loans of around $400 million with banks such as HSBC, Standard Chartered, as well as deferred payment schemes of about $1 billion with suppliers namely Malaysia's Petco, the trading arm of state-owned Petronas, and Philippines National Oil Co.
Industry insiders said, Bangladesh is the latest country to join a slew of Asia Pacific and Middle Eastern countries in adopting cleaner fuels as part of a global push.
In Asia, Sri Lanka, which was previously importing 0.25 per cent sulfur gasoil, has progressively switched to 0.05 per cent sulfur diesel earlier this year, with the majority of its import volumes now of that grade.
In North Asia, China is planning to move from the current National Phase 3 standard, which limits sulfur to a maximum of 0.035 per cent, to National Phase 5 standard, which is comparable to Euro V standard that caps sulfur at 0.001 per cent by 2017.
In the Middle East, the United Arab Emirates in July switched its motor fuel specifications from 0.05 per cent sulfur diesel to 0.001 per cent sulfur.
Saudi Arabia is expected to make a similar switch around 2016-2017.
The Jordan Petroleum Refinery which was previously importing 0.5 per cent sulfur diesel, recently switched to importing 0.05 per cent sulfur.
While in East Africa, five countries -- Uganda, Tanzania, Kenya, Rwanda and Burundi -- have agreed to lower their sulfur content in motor fuels to 0.005 per cent for diesel by January 1, as the region plays its part in reducing emissions.
azizjst@yahoo.com