September 21, 2020, 9:43 pm


2019-10-17 15:02:48 BdST

Slow work threatens second oil refinery


The building of the second crude oil refinery with an annual capacity of 3.0 million tonnes is facing delay, hit by slow construction work.

Presently, state-run Eastern Refinery Ltd is the lone operating crude oil refiner of the country, whose capacity is 1.5 million tonnes a year.

The cost of the second refinery project has been estimated at US$1.15 billion (Tk 89.49 billion) and be located in Chattogram.

The contract period of the project management consultant has already expired, executing only 20 percent of the work it was assigned to do.

The front end engineering and design for the refinery have yet to be certified by the contractor in consequence, said a senior energy ministry official.

French firm Technip carried out the engineering work, which had been reviewed and accepted by the state-run Bangladesh Petroleum Corporation after having a consultation with the Indian consulting firm, Engineers India Limited, or EIL.

Technip carried out the engineering work for the proposed refinery at a cost of Tk 2.57 billion (US$ 32.10 million).

The Indian firm is the management consultant of the project and its three-year contract with state-run BPC expired in April 2019.

As per the agreement, Engineers has to conduct a feasibility study on the refinery, decide on the plant's configuration and help the BPC select an engineering, procurement and construction contractor, said a senior BPC official.

The EIL is responsible for the overall supervision of the implementation of the new refinery in Chattogram, the official added. The contract value is Tk 1.10 billion (US$14.03 million).

"We have invited the EIL officials for a negotiation to extend the contract period by three to four years for the smooth execution of the oil refinery project," said the official. Its team is expected to visit Dhaka next week for talks.

Officials said the project was initiated in 2015 and a memorandum of understanding was signed on November 11, 2015, between the BPC and the Technip.

To expedite the project work, the BPC on April 19, 2016 assigned the Indian consultancy to manage the project.

The BPC on January 18, 2017 assigned Technip to carry out the design work for the proposed refinery.

After completing the engineering and design work, Officials said, Technip has proposed the corporation to build the refinery.

Chinese Sinopec has been considering partnering with Technip to jointly build the refinery.

Sinopec has already completed preliminary negotiations with the Technip to build a consortium for the construction, where Technip would be in the lead.

Once implemented, the new refinery could help the country save $220 million every year, trebling the country's crude oil refining capacity to 4.5 million tonnes from the existing 1.5 million tonnes per year.

The BPC and the government would provide the necessary funding to implement the project.

Currently Bangladesh imports around 6.50 million tonnes of crude and refined petroleum products a year to meet the local demand. The BPC purchased land for the refinery at Tk 2.30 billion from the ministry of industries.

The refinery can enable the country to process any kind of crude oil and become an exporter of refined petroleum exporter.

Nepal has already shown interest to import refined petroleum products from Bangladesh.

The surplus finished petroleum products can be exported to Sri Lanka, Bhutan, Myanmar and the north-eastern parts of India as well, said officials.

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

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

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