BPC\\\'s fresh plan

My attention was drawn to your news item "IMED smells rat in BPC's fresh plan" by your reporter Mr. M Azizur Rahman.
The SPM was initially conceived with reference to the expansion of ERL from the present 1.5 million tons refining capacity per annum to 4.5 million tons by adding two new units. The initial feasibility and dependable study was made by a Pakistani company, ENAR, under IDB financing. The financial analysis and internal rate of return were determined on the basis of 4.5 million tons capacity per annum and the consultant's cost estimate of investment at US$ 129 million.
Subsequently, ILF Consulting Engineers of Germany was appointed as the engineering consultant. This firm found the study report of ENAR to be technically deficient and came up with a figure of US$ 327 million by incorporating changes in the system.
Knowledgeable sources estimate that the cost would not exceed US$ 250 million after taking into consideration the changes made in the system by ILF Consulting Engineers.
Now it is reported that BPC wishes to make further changes in the system which would increase the cost to around US$ 500 million.
ERL has recently invited EOI for selection of a Project Management Consultant (PMC) and the proposals are still in the process of evaluation. The selected consultant (PMC) will next select/appoint a firm for providing the FEED for the expansion. After that ERL will tender for an EPC contractor who will also arrange the financing. Whether this strategy will be successful or not is anybody's guess.
Without making concrete progress towards installation of the two new units to increase the refining capacity, and thereby increasing the volume of crude oil import by three-folds, installation of an SPM at this point of time would be like placing the cart before the horse.
It is not clear whether the new proposal submitted by the BPC has undergone the rigours of financial analysis and the internal rate of return has been determined, and if so, whether it justifies government investment.
The proposal of the Chinese firm, CPPB, is for financing out of Chinese concessionary loan at interest rates much higher than those of IDB, ADB or World Bank and other donor countries. Also the repayment period is only sixteen years.
The IMED and the Ministry of Planning should first satisfy themselves about the financial viability of BPC's proposal.
Engr. Aung K Thein
01713 206308
theinamay@yahoo.com