Finalising design of new oil refinery in slow lane

M Azizur Rahman

The government's plan to build a new crude oil refinery is facing a setback as its design could not be finalised over the past three years. The project has remained in the slow lane owing to inadequate funding, bureaucratic bottlenecks and less priority, a senior official of the Ministry of Power, Energy and Mineral Resources told the FE.

French firm Technip had signed a memorandum of understanding (MOU) with state-run Bangladesh Petroleum Corporation (BPC) on November 11, 2015 to build the refinery aiming to treble the country's crude oil refining capacity to 4.5 million tonnes per year from existing 1.5 million tonnes per year, he said.

Technip subsequently sent technical and financial offers to the BPC on December 20, 2015 to implement the project.

Technip initially had offered to arrange US$ 600 million French credit for the project and pledged to help collect the remaining amount to implement the project from other commercial sources, a senior BPC official said.

The estimated project cost of the refinery is Tk 89.49 billion (US$1.15 billion).

The project faced an initial setback in March 2016 when Technip backed out of its initial plan to fund the project.

The French company then intended to get the job as an engineering, procurement and construction (EPC) contractor through a negotiation with the government bypassing the tender process, he added.

It was only the lack of funding, which delayed installation of a new refinery in over a decade, said the official.

To expedite the project work, the BPC on April 19, 2016 assigned Indian consulting firm Engineers India Limited (EIL) as the project management consultant (PMC) to implement the project.

The BPC would have to pay around Tk 1.61 billion to the EIL against the PMC fees, which include US$ 16.54 million plus Tk 82.28 million inclusive of local taxes, within three years.

The corporation on January 18, 2017 assigned Technip to carry out the front end engineering and design (FEED) for the proposed refinery at a cost worth Tk 2.57 billion (US$ 32.10 million), the BPC official said.

But the state-run national oil corporation had not arranged any financier yet to implement the project, he lamented.

As per the contract, Technip submitted a draft of the final FEED over the refinery project in March, 2018.

The BPC along with Indian EIL, has been reviewing the FEED before its finalisation, said the BPC official.

Once implemented, the new refinery could help the country save $220 million every year, BPC officials said.

Currently, Bangladesh imports around 7.50 million tonnes of crude and refined petroleum products combined every year to meet the local demand.

BPC arranged land for the refinery through purchasing from the Ministry of Industries for Taka 2.30 billion.

Officials said the refinery could enable the country to process any kind of crude oil and it might put Bangladesh on the path to becoming a refined petroleum products-exporting country.

Nepal has already shown interest to import refined petroleum products from Bangladesh and agreed to ink an MoU in this regard, he said. The surplus finished petroleum products can be exported to Sri Lanka, Bhutan, Myanmar and the north eastern parts of India as well, the officials said.

A consortium of three French companies led by Technip had installed the first unit of the ERL, which is also the country's sole refinery, having the crude oil refinery capacity of 1.5 million tonnes per year in the port city of Chittagong.

The first unit started commercial operations in 1968 with 30 years of economic life.

The first unit is still in operation having a de-rated capacity of around 1.4 million tonnes a year.

• Courtesy: The Financial Express /Sep 30, 2018