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Technip revises down construction cost of oil refinery to $ 2.23b

M AZIZUR RAHMAN | December 23, 2019 00:00:00

French firm Technip, which is keen to clinch the contract for building the country's second crude oil refinery, has revised down the estimated cost of its construction to US$ 2.23 billion.

The oil refinery will have an annual capacity of 3.0 million tonnes.

The revised cost of this project is around 20 per cent lower than the cost of $2.80 billion as estimated by Technip initially, a senior BPC official told the FE on Sunday.

But the Indian consultant for project management of this work has opined that the cost might be significantly lower if it is built through tendering, he added.

The Indian consulting firm, Engineers India Limited (EIL), has also estimated that the cost might be around $1.80 billion if the engineering, procurement and construction (EPC) contractor is selected through competitive bidding.

The project cost is expected to be provided by the government and the state-run Bangladesh Petroleum Corporation (BPC).

The construction of the oil refinery is now facing delay, as the contract period of the project management consultant has not been extended as yet.

The contract expired several months back but the consultant could execute only 20 per cent of the work it was assigned to do.

And the front-end engineering and design for the refinery has yet to be certified by the contractor.

Technip carried out the engineering work for the refinery at a cost of Tk 2.57 billion (US$ 32.10 million), which had been reviewed and accepted by the BPC after having consultation with the EIL.

The three-year contract between the Indian consulting firm and BPC expired in April 2019.

As per the agreement, the Indian firm, EIL, has to conduct a feasibility study on the refinery, decide on the plant's configuration and help the BPC select an EPC contractor, said a senior BPC official.

The EIL is responsible for overall supervision of the implementation of the new refinery in Chattogram, the official added. The contract value is Tk 1.10 billion (US$14.03 million).

Officials said the project was initiated in 2015 and a memorandum of understanding (MoU) had been signed between the BPC and the Technip on November 11, 2015.

To expedite the project work, the BPC on April 19, 2016 assigned the Indian consultant to manage the project.

The BPC on January 18, 2017 assigned Technip to carry out the design work for the proposed refinery.

After completing the engineering and design work, officials said, Technip has proposed building the refinery.

Meanwhile, Chinese Sinopec has also been considering partnering with Technip to jointly construct the refinery.

Sinopec has already completed preliminary negotiations with the Technip to form a consortium for the construction, where Technip would be in the lead.

Once implemented, the new refinery could help the country save $220 million every year, trebling the country's crude oil refining capacity to 4.5 million tonnes from the existing 1.5 million tonnes per year.

Currently, Bangladesh imports around 6.50 million tonnes of crude and refined petroleum products a year to meet the local demand.

The BPC purchased land for the refinery at Tk 2.30 billion from the ministry of industries.

The refinery can enable the country to process any kind of crude oil and become an exporter of refined petroleum exporter.

Nepal has already shown interest to import refined petroleum products from Bangladesh.

The surplus finished petroleum products can be exported to Sri Lanka, Bhutan, Myanmar and the northeastern part of India as well, officials said.

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