The Bangladesh Petroleum Corporation (BPC) has drafted a $3.5 billion development project proposal (DPP) to move forward with the much-anticipated bid for Eastern Refinery Ltd (ERL) Unit-2, anticipated early next year, a senior official disclosed.
“We aim to invite tenders for the project implementation early next year, following instructions from the energy adviser, with an estimated cost of $3.5 billion,” BPC Chairman Md Amin Ul Ahsan told Just Energy News on Tuesday.
He clarified that BPC intends to fund a portion of the project internally. “BPC has committed $1.5 billion from its funds, with the remaining amount to be sourced from the implementing agency,” he stated.
BPC has set aside approximately Tk 150 billion from petroleum marketing profits and deposited an additional Tk 110 billion to the public exchequer. However, BPC is yet to see a return on its Tk 82.98 billion investment in the single point mooring (SPM) system.
Currently, the SPM system is equipped to handle 4.5 million tonnes of refined diesel within three months after appointing an operations and maintenance firm. With the installation of ERL Unit-2, it will be able to handle an additional 3 million tonnes of crude oil.
The interim government canceled the previous ERL Unit-2 project, which was proposed as a joint venture with S Alam Group, under the Special Power and Energy Supply Act on August 29, 2024.
Why the Project is Necessary
According to officials, Bangladesh’s only refinery, built 56 years ago, has a refining capacity of 1.5 million tonnes of crude oil, meeting only 20% of the country’s energy needs. The new refinery is expected to refine an additional 3 million tonnes, potentially covering 60% of the country’s energy requirements while maintaining 60% public control.
Why the Project Costs to be Increased
Initially estimated at Tk 240 billion in 2018, the project’s cost has risen to Tk 418 billion due to inflation in material costs, the devaluation of the Bangladeshi Taka, and a stronger dollar. Additional expenses, including consultancy, customs duties, and VAT, were also not accounted for in the original estimate, according to ERL officials.
Sharif Hasnat, managing director of ERL, said, “We are preparing the DPP for ERL Unit-2 at a realistic cost to attract qualified international firms for project implementation.”
The project is expected to become operational five years after commencement. Currently, Bangladesh’s demand for petroleum fuel stands at 6 million tonnes.
BPC prepares $3.5bn bid for Eastern Refinery Unit-2
