Country will have to import Tk 91b furnace oil in 2012

M Azizur Rahman The country will have to import 1.60 million tonnes of furnace oil at a cost of around US$ 1.2 billion (Tk 91 billion) in 2012, up by 60 per cent from the current year's requirement of 1.0 million tonnes, a top official said Saturday. State-owned Bangladesh Petroleum Corporation (BPC) has estimated that the cost for import of furnace oil in 2012 will be 71 per cent higher than that of the estimated cost of around $ 700 million of the current year. BPC has calculated the import cost based on the furnace oil price at $ 750 per tonne including transportation cost and a premium of $ 32 per tonne. The official said the country's total furnace oil requirement for 2012 is estimated at 1.95 million tonnes, of which 350,000 tonnes will be produced domestically by the lone state-run refinery - Eastern Refinery Ltd (ERL). The country has been consuming around 1.35 million tonnes of furnace oil in 2011 including 350,000 tonnes output from the ERL. In 2010, BPC did not import furnace oil. It rather exported furnace oil regularly with small cargoes until mid-2010. Bangladesh has started importing furnace oil from late 2010 and the import volume has been soaring substantially to meet the growing demand, particularly in new furnace oil-fired power plants in the country. The government has been setting up dozens of diesel and furnace oil-fired power plants since mid-2010 to diversify the country's sources of electricity generation. A Bangladesh Power Development Board (BPDB) official said eight new furnace oil-fired power plants have been producing electricity till date. Several more furnace oil-fired power plants will start operation from December 2011, he said. The furnace oil-fired power plants currently consume around 99,000 tonnes of oil per month, said the BPC official. Furnace oil consumption in power plants will soar to 150,000 tonnes per month from March 2012 with the increase in the number of furnace oil-fired power plants. The BPC is already in talks seeking additional furnace oil supplies from the existing term suppliers. The corporation is also searching for new suppliers to arrange additional furnace oil to meet the local demand. BPC currently has term deals with Petco, the trading arm of Malaysia's Petronas, Vietnamese Petrolimex Singapore Pte Ltd, Egyptian Middle East Oil Refinery, Indonesian Bumi Siak Pusako, Emirates National Oil Company, Maldives National Oil Company and PetroChina relating to the import of furnace oil. Company officials said the corporation has been struggling to foot its fuel import bills on the back of increasing imports. The state-owned company purchases petroleum products from the international market and sells them at lower prices in the domestic market, resulting in an overall loss in its operations. Despite the latest hike, the retail price of furnace oil in the domestic market is now Tk 55 per litre. BPC still incurs a loss of Tk 4.97 per litre in furnace oil trading, said the official. BPC has been borrowing money from various agencies and banks to pay the mounting fuel import bills. The International Islamic Trade Finance Corporation, the lending arm of Islamic Development Bank Group, has recently provided a $250 million loan to BPC, in addition to a previously-committed $1.2 billion facility, to help the cash-strapped company pay its oil import bills, said the BPC official.