Draft policy sets minimum $1.0b investment for private refinery

FE Team | Published: August 19, 2009 00:00:00 | Updated: February 01, 2018 00:00:00

Nazmul Ahsan
The government would allow private petroleum refineries in the country only after a company invests a minimum $1.0 billion dollar on at least a 60-acre facility that maintains all global standards.
The pre-requisites were set in the latest draft of the Private Oil Refinery Establishment Policy 2009 prepared by the energy ministry amid a rush in offers from local and foreign companies to invest in the lucrative sector.
The draft, which also bars the refineries from selling their products in local market, has been finalised last week after inter-ministerial and expert consultations. It is expected to be sent to the Cabinet for approval.
Officials said they have prepared the draft on a fast-track basis, after two of the country's leading conglomerates Basundhara and East Coast Groups and a Czech and a Saudi companies sought permission to set up oil refineries here.
Investors see Bangladesh a ready market for oil refining as the lone state-owned company can only refine only 1.2 million tonnes of crude oil a year, accounting for a meagre 30 per cent demand of the country's fast-growing energy need.
Refining is still a no-go area for the private investors but the government has recently said it would end its monopoly in the key sector only after preparing a policy that would regulate investment in refining.
Huge capacity-constraint at the ERL has already prompted Basundhara Group to float a $700 million proposal to build the country's first private refinery in its 115 acres of land on the bank of the river Karnaphuli in Chittagong.
The group has already secured clearance from ERL and the state-run oil distributor Bangladesh Petroleum Corporation (BPC) to set up the facility --- billed to be the largest private sector investment in the country.
East Coast Group has also expressed its willingness while a foreign consortium led by the Czech state-owned export bank is learnt to have submitted a proposal to invest US$ 2.5 billion at the Kutubdia Island.
The draft policy won't say how many private refineries would be allowed by the government, but it makes it clear that "first come, first serve" policy would be pursued during the approval process.
The policy has made the compliance of all international codes and standards mandatory and environmental related regulation and equipment support compulsory for securing permission for a refinery plant.
The approved company has to start building the refinery, with a minimum investment of $1.0 billion and at least 60-acre of land, within a year after approval and it must go into production in three to five years after the date of permission, the policy said.
Private refineries will be barred from producing any petrochemical other than refining crude oil, it said.
Their refined oil can not be sold in the local market, but the government would enjoy the first refusal right in case it wants to purchase products from the company to meet local demand.
The approved company has to obtain clearance certificate from the Bangladesh Petroleum Corporation (BPC), which after assessing machinery configurations of the plant, will issue the certificate, the draft said.
The aspirant company has to submit technical report containing financial and economic analyses for the proposed refinery plant, which must be approved by a government appointed expert committee, it said.
The refinery must have waste treatment plant and sulfur recovery plant to stave off any environmental concerns.
The storage tank to preserve crude oil has to be built in line with the best practices in the American Petroleum Institute, Institute of Petroleum, International Electro-technical Commission and British Standard, the draft policy said.
An energy ministry official said the government would start approving private refinery proposals only after the policy is okayed by the Cabinet.
"We are preparing the policy to make a level playing field for the private investors. We don't want to give permission without setting the standards," he said.