Bangladesh will set up a special fund to implement the proposed Eastern Refinery Limited-2 (ERL-2) project by allocating Tk 2 from the profit of each litre of fuel sales under the fuel pricing formula, a senior energy official said.
Of the amount, Tk 1 will be used for internal loan repayment and the other Tk 1 for taxes and duties payable to the National Board of Revenue (NBR) over the next eight years, Energy and Mineral Resources Division (EMRD) Secretary Md Saiful Islam told Just Energy News.
“The government is expected to deposit Tk 800 crore to Tk 1,000 crore each for ERL-2’s repayment fund and for NBR payments,” the secretary said, adding that a gazette notification on oil pricing will be issued soon.
The estimated cost of ERL-2 is around US$3.52 billion (Tk 42,973 crore). Of the required financing, state-owned Bangladesh Petroleum Corporation (BPC) will mobilise 29.03 percent, while the remaining fund will come from the government exchequer.
The government aims to commence the project by 2030, the secretary added.
Why the Project Matters
The Eastern Refinery Limited (ERL), established in 1968 under Bangladesh Petroleum Corporation (BPC) with assistance from Pakistan, has a crude oil storage capacity of 1.5 million metric tonnes. At present, the country’s annual demand for petroleum stands at around 7 million metric tonnes, while the existing ERL unit meets only 20 percent of this demand.
Objectives of ERL-2
According to the EMRD secretary, the ERL-2 project will able to enhance energy security and stabilize supply to support economic growth.
It will also reduce subsidy requirements and save foreign currency and provide affordable petroleum products to commercial and residential users.
Eco-Friendly Refinery
The new refinery will have the capacity to refine 3 million metric tonnes of crude oil annually and produce EURO-5 standard fuels, while also upgrading the existing unit to EURO-5 compliance which are environment friendly.
In addition, ERL-2 will introduce two new products—lube base oil and low-sulphur fuel (below 10 ppm) that futures a modern effluent treatment plant(ETP) for treating liquid waste.
Government Savings
The government expects to save around $19 per barrel on crude oil after ERL-2 comes online. The project will also expand crude oil storage, strengthen ERL’s technical capacity, and improve efficiency.
With integration into the Single Point Mooring (SPM) project, crude oil unloading time is projected to drop from 15 days to just 2 days.
The BPC also plans to construct 43 oil storage tanks and set up 21 crude oil processing units under ERL-2.
Expected Outcome
Upon completion, ERL-2 will reduce Bangladesh’s dependence on Arabian Light and Marban crude by allowing the refinery to process a wider variety of crude oils sourced globally.