Govt spending for fuel import to double this yr
Wednesday, 18 May 2011
M Azizur Rahman
Government spending for fuel import will almost double to Tk 32 billion (US$4.57 billion) this year from Tk 16.50 billion ($2.35 billion), a top government official said. Due to the soaring oil prices in the international market over recent Middle East crisis in addition to the mounting domestic consumption in running new diesel and furnace oil power plants, duel import costs have increased, said the official. It is projected that in 2011, 4.0 million tonnes of diesel and 1.6 million tonnes of furnace oil will be required to meet the mounting domestic oil demands, state-owned Bangladesh Petroleum Corporation (BPC) chairman Md Muktadir Ali told the FE. BPC has imported only 2.6 million tonnes of diesel but has not imported any furnace oil in 2010. The corporation has sought funding from the government and international lenders to arrange funds for fuel import, which is currently 94 per cent higher than that of the previous year. BPC has sought a 66 per cent increase of its annual loan from Jeddah-based Islamic Development Bank (IDB), from $1.2 billion to $2.0 billion for the purpose of purchasing augmented quantity of fuel from the volatile international market, Ali said. BPC is also in talks with international banks including Standard Chartered, HSBC, and Citibank for funding assistance. They have also sought additional support from the country's Finance Ministry to foot fuel import bills. BPC chairman confirmed that Standard Chartered has recently offered BPC $250 million loan for the 2011 calendar year. They are now in a negotiation with Standard Chartered to fix the interest rate, he added. IDB may consider the BPC's plea for additional fund support, newly appointed IDB field representative Mohammad Iqbal Karim told the FE. However, everything will depend on the availability of funds from international sources, he added. IDB currently provides $1.2 billion to BPC through the International Islamic Trade Finance Corporation, an autonomous entity of IDB Group that consolidates trade finance business, at an annual mark-up rate of 5.30 per cent. IDB had provided $900 million in 2010, said a BPC official. The corporation also expects to arrange a sizeable fund from the company's domestic fuel sales, which is about Tk 1.54 billion ($22 million) per month. "Arranging funds for fuel imports in 2011 will not be a problem for BPC with support from the government, IDB, and other lenders," said the BPC chairman. BPC has already inked deals to import 2.5 million tonnes of diesel for 2011 from different sources in the Middle East and Asia, including Kuwait Petroleum Corporation, Petco, the trading arm of Malaysia's Petronas, Philippine National Oil Company, UAE-based Emirates National Oil Company (ENOC), and Egypt 's Middle East Oil Refinery (MIDOR). The corporation also inked deals to import around 1.0 million tonnes of furnace oil from Petco, Maldives National Oil Company, Egyptian MIDOR, PetroChina, ENOC, and Indonesia's PT Bumi Siak Pusako. In addition, BPC has negotiated with each supplier to import additional quantity of oil. Officials said that the country's diesel and furnace oil imports are growing significantly as it is diversifying its fuel sources by building dozens of diesel and furnace oil run power plants to cut the country's dependence on natural gas for electricity generation. As of June 2010, 82.81 per cent of the country's power plants are running on natural gas, 5.75 per cent on furnace oil, 4.29 per cent on coal, 3.95 per cent on hydro, and 3.19 per cent on gas oil. Electricity generation by renewable energy sources like solar panels, windmills, and biogas are negligible. Eight new oil-run power plants have already started supplying around 800 megawatts of electricity in Bangladesh. Over a dozen more plants are being installed to start commissioning shortly, a power ministry official said. The country's gas production for electricity generation has not increased in line with its mounting demand which initially prompted the building of oil-based power plants. The overall natural gas output in the country is now hovering around 1,980 million cubic feet per day (mmcfd) against the demand for over 2,500 mmcfd. Due to the scarcity of gas, the government has contracted out several diesel and furnace oil run power plants for operation. Overall electricity generation is currently around 4,300 megawatts (mw) against the demand for over 6,000 mw. The government has targeted to augment electricity generation by 7,000 mw within 2013 and by 10 GW by 2015.
Government spending for fuel import will almost double to Tk 32 billion (US$4.57 billion) this year from Tk 16.50 billion ($2.35 billion), a top government official said. Due to the soaring oil prices in the international market over recent Middle East crisis in addition to the mounting domestic consumption in running new diesel and furnace oil power plants, duel import costs have increased, said the official. It is projected that in 2011, 4.0 million tonnes of diesel and 1.6 million tonnes of furnace oil will be required to meet the mounting domestic oil demands, state-owned Bangladesh Petroleum Corporation (BPC) chairman Md Muktadir Ali told the FE. BPC has imported only 2.6 million tonnes of diesel but has not imported any furnace oil in 2010. The corporation has sought funding from the government and international lenders to arrange funds for fuel import, which is currently 94 per cent higher than that of the previous year. BPC has sought a 66 per cent increase of its annual loan from Jeddah-based Islamic Development Bank (IDB), from $1.2 billion to $2.0 billion for the purpose of purchasing augmented quantity of fuel from the volatile international market, Ali said. BPC is also in talks with international banks including Standard Chartered, HSBC, and Citibank for funding assistance. They have also sought additional support from the country's Finance Ministry to foot fuel import bills. BPC chairman confirmed that Standard Chartered has recently offered BPC $250 million loan for the 2011 calendar year. They are now in a negotiation with Standard Chartered to fix the interest rate, he added. IDB may consider the BPC's plea for additional fund support, newly appointed IDB field representative Mohammad Iqbal Karim told the FE. However, everything will depend on the availability of funds from international sources, he added. IDB currently provides $1.2 billion to BPC through the International Islamic Trade Finance Corporation, an autonomous entity of IDB Group that consolidates trade finance business, at an annual mark-up rate of 5.30 per cent. IDB had provided $900 million in 2010, said a BPC official. The corporation also expects to arrange a sizeable fund from the company's domestic fuel sales, which is about Tk 1.54 billion ($22 million) per month. "Arranging funds for fuel imports in 2011 will not be a problem for BPC with support from the government, IDB, and other lenders," said the BPC chairman. BPC has already inked deals to import 2.5 million tonnes of diesel for 2011 from different sources in the Middle East and Asia, including Kuwait Petroleum Corporation, Petco, the trading arm of Malaysia's Petronas, Philippine National Oil Company, UAE-based Emirates National Oil Company (ENOC), and Egypt 's Middle East Oil Refinery (MIDOR). The corporation also inked deals to import around 1.0 million tonnes of furnace oil from Petco, Maldives National Oil Company, Egyptian MIDOR, PetroChina, ENOC, and Indonesia's PT Bumi Siak Pusako. In addition, BPC has negotiated with each supplier to import additional quantity of oil. Officials said that the country's diesel and furnace oil imports are growing significantly as it is diversifying its fuel sources by building dozens of diesel and furnace oil run power plants to cut the country's dependence on natural gas for electricity generation. As of June 2010, 82.81 per cent of the country's power plants are running on natural gas, 5.75 per cent on furnace oil, 4.29 per cent on coal, 3.95 per cent on hydro, and 3.19 per cent on gas oil. Electricity generation by renewable energy sources like solar panels, windmills, and biogas are negligible. Eight new oil-run power plants have already started supplying around 800 megawatts of electricity in Bangladesh. Over a dozen more plants are being installed to start commissioning shortly, a power ministry official said. The country's gas production for electricity generation has not increased in line with its mounting demand which initially prompted the building of oil-based power plants. The overall natural gas output in the country is now hovering around 1,980 million cubic feet per day (mmcfd) against the demand for over 2,500 mmcfd. Due to the scarcity of gas, the government has contracted out several diesel and furnace oil run power plants for operation. Overall electricity generation is currently around 4,300 megawatts (mw) against the demand for over 6,000 mw. The government has targeted to augment electricity generation by 7,000 mw within 2013 and by 10 GW by 2015.