Private oil refining policy by Sept
Sunday, 9 August 2009
A Z M Anas
The government has started drafting a policy to allow private investors to refine oil and then sell in the domestic market on a limited scale, rolling back an earlier restrictive regulation, energy officials said Friday.
If approved, the first Private Oil Refinery Establishment Policy-2009 will empower private refiners to export petroleum products, but restrict wider sales within the country, thereby keeping the marketing monopoly of the state-controlled Bangladesh Petroleum Corporation (BPC).
The Bangladesh Petroleum Act 1974 bars private companies from "selling, distributing, transporting and otherwise disposing of petroleum and its refined products."
"Basically, the BPC will have an upper hand," energy secretary Mohammad Mohsin said.
"The new policy will have, however, flexibility. If needed, the government can buy products from private oil refiners," he said.
The top energy official said the policy is expected to boost investment in oil refinery, but will not give private investors a larger edge over the state agency in influencing the domestic petroleum market.
The Chittagong-based Eastern Refinery Limited (ERL) is now the country's only refinery, refining less than the country's yearly demand for petro products.
The move came as the Energy Division received at least two proposals from Bangladeshi business groups to set up oil refineries.
Local conglomerate Bashundhara Group is planning to establish the country's largest oil refinery in Chittagong investing as much as US$ 700 million with an annual capacity of 2.5 million tonnes of crude oil.
The embattled business group's proposed refinery would be built on 112 acres of land it acquired on the south bank of the river Karnaphuli and will dwarf investments by any Bangladeshi private investor.
East Coast Group, another business group, has also unveiled a plan to invest $110 million for a refinery in Chittagong to produce octane.
Energy officials said the private refining policy is crucial as many Gulf investors have backed off mainly in absence of such a policy.
They expect the policy to be finalised sometime in September, although the first draft has been reviewed.
Energy experts say the existing Petroleum Act is highly restrictive and does not provide room for participation of any private investor.
Mr Mohsin said that the policy would make it mandatory for private refiners-local and foreign-to maintain quality of international standards and environmental safeguards.
"But if the government needs refined oil, it can purchase from the private refiners," he added.
He said the Energy Division has already reviewed the first draft of the policy and work is now going on to modify the version.
The policy will allow private refiners to import crude oil and refine it, but will be barred from selling the petroleum products widely in the local market.
Energy experts have chided the draft policy's major provision, saying it would unduly protect the interest of the state agency, which lacks capacity. It will encourage more imports, they said.
Currently, ERL can refine 1.2 million tonnes of crude a year, about 30 per cent of the country's total demand. BPC buys the rest of the amount mostly from the Gulf nations.
Several Middle East refiners had earlier expressed their willingness to set up the capital intensive plants in Bangladesh, but they stepped back after getting no positive response from the government.
The government has started drafting a policy to allow private investors to refine oil and then sell in the domestic market on a limited scale, rolling back an earlier restrictive regulation, energy officials said Friday.
If approved, the first Private Oil Refinery Establishment Policy-2009 will empower private refiners to export petroleum products, but restrict wider sales within the country, thereby keeping the marketing monopoly of the state-controlled Bangladesh Petroleum Corporation (BPC).
The Bangladesh Petroleum Act 1974 bars private companies from "selling, distributing, transporting and otherwise disposing of petroleum and its refined products."
"Basically, the BPC will have an upper hand," energy secretary Mohammad Mohsin said.
"The new policy will have, however, flexibility. If needed, the government can buy products from private oil refiners," he said.
The top energy official said the policy is expected to boost investment in oil refinery, but will not give private investors a larger edge over the state agency in influencing the domestic petroleum market.
The Chittagong-based Eastern Refinery Limited (ERL) is now the country's only refinery, refining less than the country's yearly demand for petro products.
The move came as the Energy Division received at least two proposals from Bangladeshi business groups to set up oil refineries.
Local conglomerate Bashundhara Group is planning to establish the country's largest oil refinery in Chittagong investing as much as US$ 700 million with an annual capacity of 2.5 million tonnes of crude oil.
The embattled business group's proposed refinery would be built on 112 acres of land it acquired on the south bank of the river Karnaphuli and will dwarf investments by any Bangladeshi private investor.
East Coast Group, another business group, has also unveiled a plan to invest $110 million for a refinery in Chittagong to produce octane.
Energy officials said the private refining policy is crucial as many Gulf investors have backed off mainly in absence of such a policy.
They expect the policy to be finalised sometime in September, although the first draft has been reviewed.
Energy experts say the existing Petroleum Act is highly restrictive and does not provide room for participation of any private investor.
Mr Mohsin said that the policy would make it mandatory for private refiners-local and foreign-to maintain quality of international standards and environmental safeguards.
"But if the government needs refined oil, it can purchase from the private refiners," he added.
He said the Energy Division has already reviewed the first draft of the policy and work is now going on to modify the version.
The policy will allow private refiners to import crude oil and refine it, but will be barred from selling the petroleum products widely in the local market.
Energy experts have chided the draft policy's major provision, saying it would unduly protect the interest of the state agency, which lacks capacity. It will encourage more imports, they said.
Currently, ERL can refine 1.2 million tonnes of crude a year, about 30 per cent of the country's total demand. BPC buys the rest of the amount mostly from the Gulf nations.
Several Middle East refiners had earlier expressed their willingness to set up the capital intensive plants in Bangladesh, but they stepped back after getting no positive response from the government.