The state-owned Bangladesh Petroleum Corporation (BPC) is seeking $2–2.5 billion in funding from the Asian Infrastructure Investment Bank (AIIB) to implement the country’s major refinery expansion project—Eastern Refinery Ltd (ERL) Unit-2. The proposed unit will have the capacity to refine an additional 3 million tonnes of crude oil annually, a senior official said.
“We have already submitted a revised development project proposal with an estimated cost of Tk 42,000 crore (approximately $3.4 billion) for government approval. We expect to receive $2–2.5 billion in financing from AIIB,” BPC Chairman Md Amin Ul Ahsan told Just Energy News.
He added that AIIB is proposing an interest rate of around six percent. “Once the government finalises negotiations, BPC will proceed to invite bids,” the chairman stated. The remaining funding will be provided jointly by BPC, he said.
According to the chairman, the project must be completed within five years of its commencement. He also clarified that the government will not compromise on project quality, and therefore is not considering ECA (Export Credit Agency) procurement models.
Power and Energy Adviser Muhammad Fauzul Kabir Khan told Just Energy News earlier that the government had decided to implement ERL Unit-2 under public funding and plans to invite bids by December 2025.
Initially, BPC drafted a $3.5 billion Development Project Proposal (DPP), but Adviser Khan noted that the cost estimates are now under review. Multiple international financial institutions—including AIIB, US EXIM, Chinese banks, and other multilateral agencies—have expressed interest in financing the project.
The Ministry of Finance has already approved a proposal from the Energy and Mineral Resources Division to fund the project publicly, following a recent meeting between Finance Adviser Dr. Salehuddin Ahmed and Power and Energy Adviser Muhammad Fauzul Kabir Khan.
Previously, BPC had committed to contributing $1.5 billion from its own resources. It has earmarked around Tk 150 billion from petroleum marketing profits and deposited an additional Tk 110 billion into the public exchequer. However, it has yet to see a return on its Tk 82.98 billion investment in the Single Point Mooring (SPM) system.
The SPM system currently handles 4.5 million tonnes of refined diesel per year. With the addition of ERL Unit-2, it will be able to accommodate an extra 3 million tonnes of crude oil annually.
The ERL-2 project was previously cancelled by the interim government on August 29, 2024, when it was proposed as a joint venture with S Alam Group under the Special Powers and Energy Supply Act.
Why the Project Is Crucial
Officials highlight that Bangladesh’s only existing refinery—constructed 56 years ago—has a capacity to refine just 1.5 million tonnes of crude oil, meeting only 20% of the country’s current demand. The new ERL-2 unit is expected to refine an additional 3 million tonnes, raising the total refining capacity to meet around 60% of the country’s needs, while ensuring 60% public ownership.
Rising Costs
Originally estimated at Tk 240 billion in 2018, the project’s cost has now surged to Tk 418–420 billion, driven by rising global material costs, the depreciation of the Bangladeshi Taka, and a stronger US dollar. ERL officials noted that earlier estimates did not account for consultancy fees, customs duties, and VAT, which have now been included.
Once construction begins, the ERL Unit-2 project is expected to be completed within five years. Bangladesh’s current annual petroleum demand stands at around 6 million tonnes.