Suppliers seek higher premium for delay in offloading oil at Ctg

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M Azizur Rahman
The government is struggling to import furnace oil as the suppliers are demanding higher premiums from BPC for 2012 supplies to cover up losses incurred due to the unusual time taken for unloading of cargoes from oil tankers at Chittagong, a top government official said Friday.
The state-run Bangladesh Petroleum Corporation (BPC) could conclude only one deal with Malaysia's state-owned Petronas to import furnace oil at a premium of US$ 40.8 per tonne, up 27.5 per cent from the current premium rate of $32 per tonne, said the official.
"We have completed negotiation with Malaysia's Petronas to import 600,000 tonnes of furnace oil for 2012," BPC Chairman Md Abubakar Siddique said Thursday.
Premium rate has been fixed for January-June 2012 deliveries when BPC expects to import around 300,000 tonnes of furnace oil, he said.
Premium rate for July-December 2012 imports will be decided later, said the BPC chief.
"We have agreed to pay a higher premium rate for import of furnace oil from Petronas after checking other available market sources," Siddique said.
The BPC initially held talks with furnace oil suppliers in late December 2011 but failed to reach a consensus as the suppliers were seeking higher premium rates at $42-$52 per tonne.
A source close to furnace oil suppliers told the FE that they were demanding higher premium rates this time as their cargoes had to remain stranded at outer anchorage of Chittagong port as the BPC could not unload fuel in time.
Some tankers carrying 20,000 tonnes of furnace oil had to remain stranded for 15-20 days to unload furnace oil, he alleged.
Oil tankers are demanding a large amount of money from the BPC to cover up damages for 2011 imports, he added.
Cash-strapped BPC does not have sufficient furnace oil storage capacity as the demand for such oil increased abruptly due to start-up of dozens of new furnace oil-fired rental and quick rental power plants, a BPC official admitted.
The Corporation will have to face difficulties further as demand for furnace oil will go up when half a dozen more new furnace oil-fired power plants will come into operation in 2012, said the BPC official.
He said the furnace oil -fired power plants in the country currently consume about 99,000 tonnes of furnace oil per month.
This will increase to 150,000 tonnes per month from March 2012 when new power plants will come online, said the official.
Until mid 2010, the BPC rarely imported furnace oil. It rather exported furnace oil with small cargoes, said the official.
State-run oil import and marketing monopoly - BPC - has estimated that it will require 1.6 million tonnes of furnace oil in 2012, up 60 per cent from one million tonnes this year to meet growing domestic demand.
The estimated cost of the furnace oil imports in 2012 is $1.2 billion, up 71.42 per cent from import cost of around $700 million in just-concluded calendar year 2011.
BPC gets around 350,000 tonnes of furnace oil annually from BPC's subsidiary -- Eastern Refinery Ltd.
"BPC's negotiation with Petronas will be effective only after nod from the cabinet committee on government purchase," the BPC chairman said.
The cabinet committee usually endorses BPC's every negotiation to import petroleum products considering its urgency to meet the domestic demand.
"We will offer the premium rate of $40.8 per tonne to the Mean of Platts Singapore 180 CST HSFO assessments on a CFR basis to other suppliers too," Mr. Siddique said.
The BPC is trying to conclude negotiations with other furnace oil suppliers at similar rates of Petronas for furnace oil imports, he said.
Other than Petco, Vietnamese Petrolimex, Egyptian Middle East Oil Refinery, Indonesian Bumi Siak Pusako, Emirates National Oil Company, Maldives National Oil Company and PetroChina had supplied furnace oil to BPC in 2011.