New crude oil refinery still remains a dream

Construction of a new crude-oil refinery still remains a dream as the project is yet to get necessary approval from the top economic policy-making body.
State-run Bangladesh Petroleum Corporation (BPC) twice sent the Tk 237.36-billion project proposal to the Planning Commission, but the Executive Committee for the National Economic Council (ECNEC) did not approve it, insiders have said.
The Ministry of Finance approved around Tk 166.35 billion, or 70 per cent of the total project cost, as loan to implement the project and the BPC is supposed to bear the remaining around Tk 71 billion, or 30 per cent, from its own coffer.
The refinery is proposed to be built in Chattogram with an annual capacity of 3.0 million tonnes, a senior BPC official told the FE on Monday.
Without getting necessary approval to the development project proposal (DPP), the BPC has already paid around Tk 6.0 billion to Indian and French consultants to complete the primary jobs, said sources.
French company Technip has completed the front-end engineering and design (FEED) at a cost of around Tk 3.72 billion, they said.
The contract tenure of Indian consulting firm, Engineers India Limited (EIL), has already been extended twice to seven years, doubling the cost to around Tk 2.56 billion.
The BPC also purchased land for the refinery at the cost of Tk 2.30 billion from the ministry of industries.
Eastern Refinery Ltd (ERL), a wholly-owned subsidiary of the BPC, which has the responsibility to implement the project, allegedly did not act properly to get the project approved.
Despite its failure, the ERL won the 'national cooperatives award 2022,' they lamented. "It is a sheer laxity of the government," energy adviser of the Consumers Association of Bangladesh (CAB) Dr Shamsul Alam told the FE.
"The possibility to implement the project is slim as the government is more interested in extending business facilities to the private sector, keeping the state-run entities idle," he added.
Winning an award by the ERL despite this failure is a mockery, Mr Alam viewed, saying that a vested quarter having nexus with the government high-ups is lingering the project. "Consumers are the ultimate losers," he lamented.
Sources said Bangladesh could not build any crude oil refinery over the past half a century of its independence resulting in huge wastages of foreign currencies in importing refined oil from the international market.
The country's currently operational maiden crude oil refinery - Eastern Refinery Ltd - was built in 1968 by Technip, three years before the emergence of the country by the then Pakistan government.
The volume of petroleum oil imports increased to around three fold over the past five decades in line with the growing consumption in transports, industries and other commercial outlets with the expansion of the country's overall economy.
According to the BPC, Bangladesh imported around 3.30 tonnes of refined and crude oil combined during fiscal year 2001-02 at the total cost of around Tk 38.13 billion.
Of the total imports the BPC imported 2.10 million tonnes of refined oil and 1.29 million tonnes of crude oil during 2001-02.
After one decade during FY 2010-11, the BPC imported a total of 4.90 million tonnes of refined and crude oil combined, of which 3.50 million tonnes are refined oil and 1.40 million tonnes are crude oil, at the cost of around Tk 276.62 billion.
And, after one more decade during FY 2020-21, Bangladesh's overall petroleum products import increased to around 9.0 million tonnes, of which 4.15 million tonne was refined oil imported by the BPC, 1.43 million tonnes was crude oil and the remaining 3.50 million tonnes was furnace oil imported by privately-owned power plant owners.
The BPC's total import cost was around Tk 220.39 billion to import 4.15 million tonnes refined oil and 1.43 million tonne crude oil during the FY 2020-21.
Private sector's import cost was around Tk 100 billion separately also during FY 2020-21.
During FY 2023-2024, BPC has been importing around 7.0 million tonnes of crude and refined oils combined to meet the mounting domestic demand.
Market insiders said Bangladesh lost the opportunity to purchase Russian crude oil to refine due to absence of a state-of-the-art crude oil refinery.
Non-match of the specifications of Russian crude oil with that Bangladesh refines in its sole refinery -ERL - was the cause, said a senior BPC official.
Russian crude oil is available at around US$60 per barrel, much lower than the international price of Brent crude oil, which is now hovering at around US$82 per barrel.
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, said the BPC official.

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