The government has decided to invite bids for the implementation of the country’s major refinery expansion project, Eastern Refinery Ltd (ERL) Unit-2, by December 2025, with funding from public sources, a top policymaker confirmed.
“We have decided to implement the Eastern Refinery Ltd (ERL) Unit-2 under public funding and invite bids by December 2025,” Muhammad Fauzul Kabir Khan, Power and Energy Adviser told Just Energy News on Thursday.
Earlier, the Bangladesh Petroleum Corporation (BPC) has drafted a $3.5 billion development project proposal (DPP). However, Khan noted that the project’s cost estimate will be reviewed.
He further mentioned that several international financial institutions, including the Asian Infrastructure Investment Bank (AIIB), US EXIM, Chinese banks, and other multilateral donor agencies, have already expressed interest in funding the project.
“We are currently determining the amount of external financing we will secure and how much BPC would contribute,” Khan added.
The Ministry of Finance has already approved a proposal from the Energy and Mineral Resources Division to implement the project through public funding following a meeting between the finance adviser Dr Salehuddin Ahmed and power and energy adviser Muhammad Fauzul Kabir Khan last Wednesday.
According to official sources, the government plans to procure 40% of the funding through external loans, with another 60% to come from the public exchequer. Earlier, BPC had committed to providing $1.5 billion for the project.
BPC has set aside approximately Tk 150 billion from petroleum marketing profits and deposited an additional Tk 110 billion into the public exchequer. However, the corporation has yet to see a return on its Tk 82.98 billion investment in the Single Point Mooring (SPM) system.
Currently, the SPM system is capable of handling 4.5 million tonnes of refined diesel. With the installation of ERL Unit-2, it will be able to handle an additional 3 million tonnes of crude oil.
The interim government had previously canceled the 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’s Costs Have Increased
Originally estimated at Tk 240 billion in 2018, the project’s cost has now 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 fees, customs duties, and VAT, were not accounted for in the original estimate, according to ERL officials.
The project is expected to become operational five years after commencement. Currently, Bangladesh’s demand for petroleum fuel stands at 6 million tonnes.
