Decision may put existing supply-chain in trouble

FE Team | Published: June 17, 2013 00:00:00 | Updated: February 01, 2018 00:00:00

M Azizur Rahman The government has decided to authorise a new private firm to import and supply fuel to the country's oil-fired power plants. Industry insiders feared that the decision might put the existing supply-chain in troubles. The present authority of the state-owned Bangladesh Petroleum Corporation (BPC) to import fuel and supply it to power plants through three of its marketing and distribution companies, will be curtailed significantly once the new firm starts functioning, they said. Country's overall costs for importing fuel for power plants may then increase substantially, in the event of which the power tariff will require to be hiked, the concerned circles observed. The government is currently evaluating initial bids from four interested firms including Singapore-based Vitol Asia Pte Limited to select a sponsor, having the majority stake of 51 per cent, to form a fuel supply company under a joint venture (JV) with two state-owned entities, a senior official of the ministry of power said. Three other firms which submitted qualification statements to become the majority stakeholder of the JV firm include -- United Enterprise & Company Ltd, the consortium of Summit Industrial & Marketing Company Ltd and Summit Oil and Shipping Ltd and the consortium of Aman Tex and Bulk Petroleum Trade Ltd, he added. The state-owned Bangladesh Power Development Board (BPDB) will have 39 per cent stake with the fuel supply company, while the BPC will hold the rest, said the official. "We have been scrutinising the bids after opening of those at the close of the bid submission date on May 16 last," said a senior BPDB official. Successful bidder or bidders will be requested to submit final bids on completion of the initial bids, he said. The fuel supply company will be responsible to import fuel from the international market and sell it to power plants alone, the official added. It will cater to the needs of the power sector only, aiming at relieving the BPC of an ever-increasing financial burden. While the company will be allowed to import oil products, it will not be allowed to sell those in the domestic market. The electricity generation companies, owned both by public and private sectors, will purchase fuel from the firm to run their oil-guzzling power plants, he added. The company will get some nine per cent commission from the government and might also get a waiver on import tax payments on account of import of fuel from the international market, he said. Until now, the BPC has been supplying oil-fired power plants -- both private and state-owned - with imported oil products from the international markets. Three of its oil marketing and distribution companies -- Meghna Petroleum Ltd, Jamuna Oil Company Ltd and Padma Oil Company -- are currently involved in supplying fuel to the oil-fired power plants, the BPDB official said. Currently, BPDB purchases fuel from the BPC and supplies it to oil-fired power plants for generation of electricity. The BPDB that buys electricity from the power plants to supply to the national grid, made the proposal to facilitate oil supply to power plants in 2012. Initially, there was a plan that the BPDB would have a majority stake of 51 per cent and the remaining 49 per cent will go to the selected sponsor or sponsors. This was later changed in favour of the sponsor/s, by increasing stakes to ensure sponsor/s majority, a BPDB official said. Amid a situation of its fast-depleting natural gas resources, Bangladesh launched a drive to increase oil-based power plants from mid-2010, having a target to commission over three dozen new oil-based power plants by 2013. Initially, the BPC had been facing logistics problems to supply fuel due to lack of coordination among the three state-run entities -- BPC, BPDB and Bangladesh Railways -- and inadequate road, railway infrastructure, said sources. But it later strengthened the fuel supply-chain to the power plants and currently it has not been facing any problem in fuel supply to such plants, a senior BPC official said. When contacted, Professor M Tamim of Bangladesh University of Engineering and Technology (BUET), said that delegating the authority to a lone private firm will create scope for monopoly that may lead to increased fuel import cost and power tariff. "Any private firm will tend to make hefty profits in such a situation at the cost of public money," he said. Mr. Tamim, who was a Special Assistant to the previous caretaker government, said the government may open it up and several firms could be given the opportunity to import fuel and supply it to power plants to limit the scope for creation of any monopoly, if the BPC is found to be not fit for the job. The government will make a big mistake by empowering a single firm to import fuel and supply it to power plants, he cautioned. Currently, a total of 35 oil-fired power plants are operational across the country, having an aggregate capacity to generate electricity up to 2,280 megawatts (mw), the data from the Power Division under the ministry of power, energy and mineral resources showed. Of them, 23 are running with furnace oil and have a total capacity for generating 1,787 mw of electricity and the remaining 12 are running with diesel with the generation capacity at 393 mw. Several new oil-fired power plants are set to come online within the next one year, the sources said. The BPC has planned to import 5.67 million tonnes of crude oil and refined products during the period between July 2013 and June 2014, up by 11.17 per cent from estimated imports of 5.1 million tonnes in the outgoing fiscal year to June 30. For the forthcoming fiscal, the BPC is planning to import 1.4 million tonnes of crude, 3.0 million tonnes of diesel, 1.0 million tones of furnace oil and a combined 267,000 tonnes of kerosene, jet fuel and octane, the official said. BPC currently has term deals to import refined oil products from Kuwait Petroleum Corp, Petco, the trading arm of Malaysia's state-owned Petronas, the Philippines National Oil Company, Emirates National Oil Company, Egypt's Middle East Oil Refinery, the Maldives National Oil Company, state-owned PetroChina and Indonesia's Bumi Siak Pusako. Furthermore, it has deals in place to import crude oil from Saudi Aramco and the Abu Dhabi National Oil Company.