A Tk 364.1-billion fresh project now moves for establishing a stalled second petroleum-refining unit at the Eastern Refinery Limited (ERL), ditching detractors' subtle bids for handover of the fuel business to vested quarters, sources said.
The Energy and Mineral Resources Division (EMRD) has submitted Preliminary Development Project Proposal (PDPP) to the Planning Commission for setting up the new ERL unit with an annual refining capacity of 3.0 million tonnes.
As planned afresh -- now with a cost escalation for the delays -- Bangladesh Petroleum Corporation (BPC) will provide Tk 109.09 billion for the project, while the remaining Tk 255.01 billion is expected to be secured from foreign loans. To this end, the EMRD has sent a copy of the PDPP to the Economic Relations Division (ERD) to explore financing options.
The government first decided in 2010, with an estimated cost of Tk 130 billion based on feasibility study funded by the Islamic Development Bank (IsDB), to establish the second unit of the ERL to reduce dependence on its aging first unit, established way back in 1968.
However, due to the delay caused by unavailability of foreign resources, the EMRD redesigned the DPP in 2023 with estimated cost of Tk 237.36 billion through domestic financing.
However, the proposal was withdrawn from the Planning Commission to implement the project with funding from the controversial S Alam industrial group, and an agreement was signed with the acquisitive conglomerate-now in the wilderness following the fall of the past government in an uprising.
The current interim government canceled the agreement with S Alam and decided to proceed with the new unit under a project of the Annual Development Programme (ADP).
The cost of the project is set to be increased by Tk 126.74 billion, or 53.40 per cent, over the past two years due to delays in the name of the PPP framework, while it would increase 2.8 times compared to its 2010 estimate. Energy experts say the project, vital for the economy, should have been implemented much earlier. They believe the delay was strategically used to transfer the petroleum business to private entrepreneurs and warn that it has inflated costs. They recommended verifying the component-wise costs in the new proposal.
In a forwarding letter sent with the PDPP, the EMRD has said, "It has been decided to implement the project titled 'Modernization and expansion of eastern refinery limited (ERL)' with foreign financing and BPC's own financing."
The project, which received approval in principle, would be completed by February 2030, subject to start in March this year.
The proposal highlights that the state-owned Eastern Refinery is currently capable of refining only 1.5 million tonnes of petroleum products against an annual fuel demand of Bangladesh for about 7.0 million tonnes. The ERL has supplied 18.62 per cent to 23.92 per cent of the total petroleum- oil and -lubricant demand.
The project aims to boost refining capacity to 4.5 million tonnes per year by adding another 3.0 million tonnes.
The new plant will produce Euro-5-quality fuels (octane and diesel) with a sulfur content of less than 10 PPM, adhering to global environmental standards and promoting cleaner air for future generations.
The EMRD also states that implementing this project would save foreign exchange by reducing dependence on imported refined petroleum.
In addition, the plant would help increase the income of BPC by processing various value-added by-products at affordable costs, alongside the production of liquid fuels from refining crude oils, reveals the project proposal.
"The proposed refinery will serve as a 'Forward Linkage' for the 'Installation of Single-Point Mooring (SPM) with Double Pipe Line' project, which is set to be implemented at a cost of approximately Tk 71.24 billion, said the BPC official.
Sources indicate that the SPM project has the capacity to transport 9.0 million tonnes of fuels annually, split equally between 4.5 million tonnes of refined fuels and 4.5 million tonnes of crude oils.
Until the new refinery is completed, two-thirds of the SPM's capacity regarding crude oil will remain idle.
The feasibility study, conducted by Engineers India Limited (EIL), has confirmed that the entire investment will be recovered in less than seven years, banking on an internal rate of return (IRR) of 16 per cent.
The Front End Engineering Design (FEED) report, prepared by French company Technip, reveals that the new refinery will help save US$19 per barrel of oil.
The EMRD has projected that petroleum demand in the country will reach 11.45 million tonnes in the fiscal year 2023-31 with an average growth rate of 5.9 per cent in the next couple of years.
Once the second unit is commissioned, ERL will be able to supply about 40 per cent of the national demand while the share of ERL will fall to just 13 per cent in the absence of new plant.
An ERD official states that the search for funding to finance the project will begin "as soon as possible", targeting development agencies such as the Asian Development Bank (ADB), the Islamic Development Bank (IsDB), the Asian Infrastructure Investment Bank (AIIB), and the World Bank.
The project proposal asks for Tk 591.90 million for training and foreign tours for government representatives, with Tk 513.83 million to the EPC contractor and Tk 57.18 million through the BPC. Another Tk 20.89 million will cover contractor-office visits and inspections.
An additional Tk 4.18 billion is requested for project -management consultancy, while Tk 17.47 billion is asked for telecommunications and control equipment.
Professor M Shamsul Alam, Energy Adviser at the Consumers Association of Bangladesh (CAB), says expanding the refining capacity of the ERL is crucial for the economy and it was wise to start the implementation of the project earlier.
He deplored that the project has not started even after more than a decade and a half of efforts, ignoring public interest, to achieve the ill motive of transferring petroleum business to the private companies.
Calling the government officials and policymakers involved "fuel terrorists," he says, "Those responsible for such actions must be identified and brought under punishment."
The prolonged delay pushed the project cost to increase several times, he told the FE correspondent, adding: "The proposed cost of each component must be reevaluated, and the Bangladesh Energy Regulatory Commission (BERC) has the jurisdiction to do so."
I believe the phrase "to cut fuel imports" should be replaced with "to cut refined fuel imports."
jahid.rn@gmail.com
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