Outdated energy system undermines national power security

The nation has been grappling with a severe oil crisis. While the US-Israel war on Iran triggered the disruption, Bangladesh's limited capacity to import, store, and manage petroleum products has intensified the situation.
Azam J Chowdhury, managing director of listed company MJL Bangladesh and chairman of East Coast (EC) Group, said this in an interview with The FE.
The oil tankers of MJL Bangladesh, a joint venture of EC Securities, an EC Group subsidiary, and the state-owned Jamuna Oil Company, carry more than 56 per cent of the annual crude oil imports by the government.
Mr Chowdhury said energy infrastructure must include modern crude oil refineries, adequate storage facilities, efficient and cost-effective systems for unloading crude oil from tankers, and a well-defined pricing model.

Eastern Refinery Ltd., which commenced operations in 1968, is equipped to refine crude oil imported only from Gulf countries, specifically from Saudi Aramco in Saudi Arabia and ADNOC in the UAE. Its fuel refining capacity is also limited to 35,000 barrels per day.
Over time, demand for fuel in the country has increased without any corresponding expansion of refining capacity.
The country needs a modern facility with a refining capacity of at least 100,000 barrels of crude oil per day, with imports sourced from diverse countries to ensure optimal supply under all circumstances, especially when the global oil market becomes volatile due to wars and conflicts.
Bangladesh also lacks fuel storage facilities.
A storehouse was built during the Awami League-led government in 2024 with a capacity of 0.35 million tonnes to preserve imported petroleum products, along with the installation of a 74-kilometer-long offshore pipeline from Kutubdia in the deep sea to Anowara at the bottom of the Bay of Bengal. The Single Point Mooring and the storehouse have been sitting idle for some "technical reasons".
The Single Point Mooring could reduce the time to unload crude oil from deep sea from 12 to two days. At present, lighterage vessels take 10-12 days to unload crude oil from a large tanker in deep sea, said Mr Chowdhury.
On financing a modern refinery, he said the estimated cost of construction is above $5 billion. The Islamic Development Bank (IsDB), a Jeddah-based global lender focusing on Islamic finance, has pledged to provide $1 billion. The rest can be financed by the Bangladesh government.
"The estimated cost of a new refinery is not enormous in the context of other mega projects," Mr Chowdhury said, adding that the government must understand the urgency of a modern refinery.
On profitability of a modern refinery, he said the first and foremost purpose is to ensure energy security.
Amid the deepening fuel supply shortage, the government has been seeking ways to import crude oil from other countries, as the Eastern Refinery stopped production last week due to a shortage of raw materials.
In the absence of any storage of crude and refined petroleum products for at least three months, the nation suffers badly from an abrupt halt to oil imports from Gulf nations.
"Before conducting an initial trial, imports of crude oil [from new sources] would not help ease the problem," Mr Chowdhury noted.
Secondly, major oil companies such as Shell, BP, and ExxonMobil import raw materials, including base stock, also known as base oil, to produce lubricant oil.
These private entities could purchase raw materials from a refinery having wider capacity, generating revenue from byproducts for the government. "At one stage, a modern refinery would be a profitable entity for the government."
MJL Bangladesh is one of the leaders in the Bangladeshi engine oil market with a 30 per cent market share. Of MJL's subsidiaries, Omera Petroleum provides high-quality LPG services across the country. Another subsidiary, Omera Gas One, specializes in providing bulk LPG solutions to commercial, industrial, and residential sectors, while also managing the construction and operation of automotive LPG filling stations.
Empowering BERC for proper fuel pricing
Mr Chowdhury also laid emphasis on deployment of the Bangladesh Energy Regulatory Commission (BERC) to benefit consumers.
The job of the BERC is to fix prices of all kinds of energy products. But the commission has so far been allowed to determine prices of LPG through public hearings, while the government has fixed prices of other petroleum products.

Governments import fuel aligned with the price index in the global market. So, prices would go up if the index rises and vice versa. Consumers, while paying higher due to price hikes, must enjoy a price cut after a decline in global fuel prices.
"In Bangladesh, fuel prices never go down when the index goes down. Consumers keep bearing higher expenses on fuel.
"The responsibility of pricing under a model should lie with the BERC so that consumers are benefited," Mr Chowdhury added.
In the meantime, the impact of the fuel supply disruption has gone beyond transport and industrial manufacturing. The boro paddy crushing, which has already begun, is hampered by the shortage of diesel following the suspension of crude oil imports through the Strait of Hormuz.
Good energy infrastructure not only helps tackle a war-induced crisis better but also provides a cushion against oil price volatility in the global market, added the managing director of MJL Bangladesh.
mufazzal.fe@gmail.com