Eastern Refinery’s second unit project still in limbo

The project to build a second unit of the state-owned Eastern Refinery Limited (ERL) in order to increase the refining capacity of the company has not been launched even in 11 years.

In 2010, the government decided to build the second unit of the company, which is playing the most important role in the fuel security of the country, with a refining capacity of three million tonnes to meet local demand.

However, Bangladesh Petroleum Corporation (BPC), the operating company of ERL, has not been able to finish the feasibility study of the project, undertaken at an initial cost of Tk13,000 crore.

Industry insiders have expressed their concern that the delay in setting up the alternative plant will jeopardise the country's fuel security.
Once the company used to refine imported crude oil and export it after meeting demand in the country. Curiously, the country is now more import dependent for refined oil as no new plant has been built in this sector.

The development project proposal (DPP) relating to the second unit was amended for the 10th time recently. The final proposal has been sent to the ministry. But it has not been approved yet.

Meanwhile, the estimated cost of the project has spiked from Tk13,000 crore to Tk18,000 crore.

According to BPC and ERL, the country's annual fuel demand is more than 5.5 million tonnes. At present, the refining capacity of ERL is 1.5 million tonnes. The second unit of the new project will add the capacity of refining 3 million tonnes of oil. The total capacity then will be 4.5 million tonnes.

BPC and ERL officials could not say anything as to when the project will start anew.

Several senior BPC officials, speaking on condition of anonymity, said the implementation of the BPC's project is being delayed to give opportunities to private sector refineries.

Despite various initiatives to implement the project from the higher echelons of the government, the responsible officials could not start the work of the project.

They claimed the ministry of energy is upset with the officials involved in the construction of new projects of BPC and ERL over the delay.

Engineers India Limited, an Indian company, was appointed project management consultant (PMC) of the project undertaken in 2010. On 19 April 2016, the BPC signed an agreement with an Indian consulting firm. 

At the signing ceremony, State Minister for Power, Energy and Mineral Resources Nasrul Hamid had said work on the ERL-2 project would begin by 2017. The state minister again announced the start of the work on the project soon on 7 May 2018 on the occasion of the golden jubilee of the ERL in Chattogram.

Later, on 6 September 2020, the state minister expressed his dissatisfaction with the progress of the project at an online review meeting of the BPC's ongoing development projects.

At the meeting, he said the ministry would not take responsibility for the increase in project cost due to the failure and incompetence of project managers.

He also instructed that monitoring be intensified to expedite the work of the project. Following the directive of the state minister, the managing director of Eastern Lubricants Blenders Limited (ELBL), Md Lokman, was appointed managing director of Eastern Refinery Limited on 8 January this year.

ERL officials, who did not want to be named, said ERL's former managing director Akhtarul Haque was removed by the ministry as he could not demonstrate the progress of the project. He was accused of delaying the implementation of the project.

BPC and Eastern Refinery officials said that despite repeated notices from the government to start work on the project, the relevant officials could not show any progress. Moreover, the approval of private sector refineries was also noticed during this period.

According to them, if the government implements this project, the private sector refineries will have to do business in a competitive market. Due to such reasons the BPC could not start work on the project even after a decade.

The current Managing Director of Eastern Refinery Limited, Md Lokman, said, "I have just got responsibility of the company. I will not give any information to the media about when the work of the second project of the refinery will start or whether it will start at all. If you want to know something, you can find out from BPC or the ministry."

The ERL refinery was designed in 1968 by the French company Technip. The work of the proposed 2nd project has also been given to Technip. The new project has an estimated cost of Tk322 crore for installing physical installations and equipment as per design of Technip. 

However, the project cost will increase due to excessive delay in the work of the project. Besides, this project includes 10 processing units. Upon completion of the second unit, LPG, Gasoline Euro-5, Diesel Euro-5, Group-3 Base Oil, Jet A-1, Fuel Oil, Bitumen and Sulphur will be available as finished products from ERL. This will save on the cost of imported refined fuel oil.

At the beginning of the project in 2010, the expenditure was estimated at Tk13,000 crore. Later, the project of the second unit was passed at a revised cost of Tk16,739 crore. After that, several letters were sent to the ministry regarding the commencement of the project, but the work could not begin. 

The DPP of the project was submitted to the ministry in 2018, but this DPP has been amended several times. The term of DPP has been fixed from January 2021 to December 2024.

The estimated final budget of the project is Tk17,835.19 crore. The project is waiting to be passed.

According to Syed Mehedi Hasan, director (Operations and Planning) of Bangladesh Petroleum Corporation and Director of the ERL board, "The DPP of the ERL-2 project has been amended for the 10th time and a proposal has been sent to the ministry for a new term. Work will start if the project is passed. The new term will not be extended."
Production, import and export

Eastern Refinery Limited produced 9,793 tonnes of LPG, 96,8621 tonnes of naphtha, 87,866 tonnes of MS (petrol), 5,853 tonnes of HOBC (octane), 127,077 tonnes of SKO (Kerosene), 495,70 tonnes of HSD (diesel), 20,249 tonnes of JBO, 303,511 tonnes of furnace oil (FO), 58,162 tonnes bitumen, 10,288 tonnes of other products in 2017-18.

In 2017-2018, Eastern Refinery imported 46,527 tonnes of High Speed Diesel (SSD), 26,227 tonnes of High Octane Blending Component (H&BC), and 50,051 tonnes of Furnace Well (HS).

In 2014-2015, the company exported 93,086 tonnes of naphtha, but the export has remained stopped since next year.