CHATTOGRAM, Aug 26: The construction of a second unit of Eastern Refinery Limited (ERL) is expected to undergo another review, with a view to rejecting S Alam Group's proposal to partner with ERL on this project.
As the ERL authority has categorically decided to turn down the proposal of S Alam Group, the project will now be carried out by the government, as previously decided, sources concerned said.
They said the previous process to establish the second unit of ERL was nearly halted when the proposal of S Alam Group came to the fore in July last. In response, a committee was then formed to create an action plan for a joint venture between ERL and S Alam Group to execute the project titled 'Installation of ERL Unit-2'.
The committee completed the final report for signing a Memorandum of Understanding (MOU) with the S Alam Group under the Public Private Partnership, with an estimated cost of Tk 400 billion.
However, it now appears unlikely that the second unit of ERL will be constructed in collaboration with S Alam Group.
The government had allocated fund for the project in early 2023. But in October of the same year, the S Alam Group submitted a proposal to the then Prime Minister's Office to build the refinery on an 80-20 equity basis on the ERL's land in Chattogram.
On January 29, 2024, the group sent a draft letter of intent to the energy ministry.
On February 5, the energy division notified the Bangladesh Petroleum Corporation (BPC), the parent company of ERL, about the decision to build the second unit under a joint venture with the S Alam Group, with a request for formation of a negotiation committee.
The committee prepared a Memorandum of Understanding (MoU) on May 12, which BPC submitted to the ministry as a draft on July 16. However, all activities related to the MoU were subsequently suspended.
Managing Director of ERL Engineer Md Lokman told The Financial Express, "I was a member of the negotiation committee. The committee submitted a report to the BPC. However, ERL and BPC are no longer interested in the proposal of S Alam Group as the government decided to proceed with the construction of the 2nd unit on its own."
"However, the work on 2nd ERL unit will soon be reviewed again to reject the proposal of the S Alam Group. As per earlier decision, the project will be executed by the government, and I hope work will resume soon," he added.
He also said, "Initially, the government allocated 70 per cent of the total funds as a loan, with the remaining 30 per cent to be provided by BPC. We had submitted the Development Project Proposal (DPP) earlier, and the finance ministry allocated funds for the project."
"Later, we submitted the final DPP to the cabinet committee for finalisation of the DPP," he added.
The project for the 2nd unit of ERL was first approved by the government in 2014 under the Quick Enhancement of Electricity and Energy Supply (Special Provision) Act, 2010.
In 2013, the project cost was estimated at Tk130.00 billion.
Last year, the BPC submitted a proposal to the Planning Commission for approval to implement the project with its own funding, with the project expenditure initially proposed at Tk197.69 billion, which has now increased to Tk 237.46 billion.
The additional costs are due to a rise in the dollar rate and construction material prices. However, the design work for ERL 2 has been completed.
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