The government's failure to lure investments worth US$1.5 billion to implement two important projects - installation of a new crude oil refinery and a single point mooring - is increasing fuel import and electricity generation costs, said sources.
Fuel import costs, especially of state-owned Bangladesh Petroleum Corporation (BPC), could have been reduced significantly if a new crude oil refinery could be built, Managing Director of state-owned Eastern Refinery Ltd (ERL) Gazi Md Ali Afzal said.
He said costs of imported refined petroleum products are higher than those refined in the local refinery as the price of crude oil is lower than refined oil products in international market.
The ERL official could not tell exactly the extent of profit after refining crude oil in oil refinery as the price of petroleum products fluctuates in the international market.
A senior BPC official, however, estimated that building the new refinery would reduce the BPC's import costs by around Tk 7.0 (9.0 US cents) per litre.
Timely installation of a single point mooring (SPM) to carry petroleum from vessels moored at an outer anchorage to depots onshore could save both time and money. It would help unload crude and refined petroleum products from ocean-going vessels in the deep sea without berthing at the port, a senior BPC official said.
The BPC, the country's petroleum products import and marketing monopoly, currently pays US$5.50 per tonne to small vessels owned by the state-owned Bangladesh Shipping Corporation (BSC) to ferry petroleum to the shore from larger vessels moored at the outer anchorage in the Bay of Bengal, he added.
The platform could save the BPC around $8 per tonne now being incurred due to vessel transfer, said the official.
It could also bring down fuel unloading time to around one-fourth or to two-three days from current 11-12 days and thus raise fuel handling capacity of the BPC.
It might save at least $40 million annually as the BPC could avoid paying fare of lighterages, he added.
State Minister for the Ministry of Power, Energy and Mineral Resources (MPEMR) Nasrul Hamid, however, said the government is trying to get necessary funds soon to implement both these projects immediately.
Officials said, the BPC is currently struggling to arrange funds to build the country's second refinery with a capacity of 3.0 million tonne per year at a cost of around $1.2 billion.
The BPC's subsidiary ERL with 1.5 million tonne per year capacity is the country's sole oil refinery.
The ERL started commercial operation when the country's overall requirement of petroleum products was only around 500,000 tonnes, said the BPC official.
But the country could not install a second refinery until today although the requirement of petroleum skyrocketed 12 times to around 6.0 million tonne, he lamented.
Electricity generation costs from the high-cost oil-fired power plants could be reduced significantly if both these two important projects could be implemented, a senior official of state-owned Bangladesh Power Development Board (BPDB) said.
Currently, the BPDB, being the lone buyer of electricity from power plants, has to pay fuel import costs in addition to electricity purchasing costs, said the official.
Sources alleged that although the government had long been trying to build a new refinery unit for long, it could not implement it due to lack of sincerity.
The government initially had planned to enhance the refining capacity of the existing ERL by balancing, modernisation, rehabilitation and expansion (BMRE) several years back but failed to select finally a bidder to implement it.
It is currently holding talks with different foreign firms and donor agencies for building the refinery without any much headway, said sources.
Regarding implementation of the SPM, the government had initially estimated 'wrong' project costs of around $136 million on the basis of a feasibility study conducted by a Pakistani firm, it has been alleged.
Jeddah-based Islamic Development Bank subsequently had agreed to fund $ 129 million to help install the SPM near Kutubdia island in the Bay of Bengal.
But the estimated costs grew later when a German-based firm, ILF Consulting Engineering, carried out a detailed study on the proposed SPM and re-estimated the project costs at $327 million, said the BPC official.
The IDB has agreed to increase its funding by 70.54 per cent to $ 220 million from its earlier commitment of $ 129 million.
But the government is still struggling to arrange additional fund for the SPM project, said sources.
The BPC undertook the SPM terminal installation project in May 2010 to check pilferage and ensure efficient handling of imported petroleum products.
The 77-km 36-inch diametre pipeline is planned to link the ERL with the SPM.
The country's fuel import is mounting as the annual petroleum requirement is growing with the commissioning of some three dozens of fuel oil and gasoil fired power plants since mid-2010.
The BPC imported 5.2 million tonne of crude and refined oil products for fiscal year 2012-13 at an estimated cost of around $5 billion.
During fiscal year 2009-10, Bangladesh imported a total of 3.75 million metric tonnes of fuel, crude and refined combined.
The BPC funded its oil imports mostly with loans from the International Islamic Trade Finance Corporation, or the ITFC, the lending arm of the Islamic Development Bank.
The state-run company also took loans from foreign banks under deferred payment mechanism with fuel suppliers.
It also took loans from the government to pay its import bills. Part of the funding also came from revenue generated from sale of oil products in domestic market.
The BPC currently has term deals to import refined oil products from Kuwait Petroleum Corp., Petco, the trading arm of Malaysia's state-owned Petronas, the Philippine National Oil Company, the Emirates National Oil Company, Egypt's Middle East Oil Refinery, the Maldives National Oil Company, state-owned PetroChina and Indonesia's Bumi Siak Pusako until December 2014.
It also has deals in place to import crude oil from Saudi Aramco and the Abu Dhabi National Oil Company up to December 2014.
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