Fuel supply directly from ship to Single Point Mooring soon as operator finally picked

The government has decided to bypass the open tender process and appoint China Petroleum Pipeline Engineering Company Limited for the operation and maintenance of the country's first Single Point Mooring (SPM) system in Maheshkhali, Cox's Bazar, under a government-to-government (G2G) agreement.

Energy Adviser Fouzul Kabir confirmed that the decision to proceed with the Chinese state-owned company had been made.

"This, however, does not mean [we are] abandoning the plan for an open tender process," he told The Business Standard.

He said the Single Point Mooring system has been idle for a long time, and it will be operationalised with the Chinese company for now. "Later, we will train our own personnel for the task. We are opting for the G2G method to expedite the process."

The SPM system, equipped with a double pipeline setup, has been constructed to facilitate the direct transfer of imported petroleum from deep-sea vessels to onshore facilities. This infrastructure is essential to ensure a reliable fuel supply for Bangladesh's growing energy needs.

Located 16km offshore from storage tanks at Matarbari in Cox's Bazar, the floating buoy is connected by 110km double pipelines – 73km offshore and 37km onshore – to carry refined petroleum oil and diesel from mother vessels to storage tanks in Maheshkhali.

However, the failure to appoint an operator left the Tk8,298 crore Single Point Mooring system idle for seven months after its commissioning in March this year. 

Earlier in May, during the tenure of the Awami League government, the Chinese company was in the process to get the contract under the Electricity and Energy Rapid Supply Enhancement (Special) Act, which allows expedited work grants.

After the 5 August regime change, the interim government suspended all negotiations and procurement processes under this law in August.

Despite this suspension, the Energy and Mineral Resources Division, along with the Bangladesh Petroleum Corporation (BPC), is now moving forward with awarding the contract to the Chinese firm through a G2G agreement.

The proposal for the contract has been finalised, with Energy Adviser Muhammad Fouzul Kabir Khan approving it, according to sources from both the Energy Division and the BPC.

They said the proposal will soon be presented to the Cabinet Committee on Economic Affairs for further approval. If approved, cost negotiations will follow before the contract is signed.

Adviser Fouzul Kabir explained that there are three valid business methods: open tender, G2G, and PPP. "All three methods are valid options for us." 

He further clarified that the open tender process would take more time and bring in new companies, China Petroleum Pipeline Engineering, which has already implemented the SPM project, was the most logical choice. 

"Therefore, we have decided to proceed with them. However, we will monitor the costs and ensure technology transfer so that, in the future, we can manage and operate the system ourselves," he said. 

M Shamsul Haque, a Buet professor and infrastructure expert, however, said both the Direct Procurement Method and G2G agreements lack transparency. 

He explained that while G2G agreements may appear straightforward, they often involve behind-the-scenes syndicates that inflate rates and compromise pricing integrity. 

"Despite meetings with officials, rates are typically set through informal understandings, leading to higher costs and vested interests," he added.

Currently, both imported refined and crude oil are transported onshore from deep-sea vessels by lighterage ships and distributed to storage facilities across the country.

Single Point Mooring contract

The Single Point Mooring project was initially approved in 2015 with an estimated budget of Tk4,936 crore and a completion timeline of December 2018. However, delays and budget revisions increased the project's cost to Tk8,298 crore, with completion now expected by December 2024.

While China Petroleum Pipeline Engineering Company completed the construction, the agreement excluded operational training and maintenance – a standard practice in similar projects globally.

Regarding the project's contractual arrangement, Energy Adviser Fouzul Kabir described it as an "unusual" contract model.

"The company built the project, but the operation was not included in the agreement," he explained.

In typical projects, the company that builds the system also operates it and provides training for local personnel, he added.

"Without operation, the project is meaningless. The oil needs to be moved. It's truly an unconventional contract."

M Tamim, a member of the White Paper Committee that is assessing the state of Bangladesh's economy, is reviewing the costs of G2G agreements signed during Sheikh Hasina's tenure in the energy and power sector.

He said an analysis of the energy and power sector projects revealed a pattern during the previous government's tenure. 

"A benchmark used to be set for G2G projects, and contractors were appointed at slightly lower costs than this benchmark. However, even with this adjustment, the project costs remained significantly higher than necessary, allowing room for corruption," he said.

To facilitate corruption, project costs were inflated even during open tender contractor selections, added Tamim.

Energy Division's rationale

In a detailed summary to be presented to the Economic Affairs Committee, the Energy Division has justified its decision to proceed with the G2G contract with the Chinese company.

The Division explains that while the interim government has suspended the appointment of an operator or management contractor under the Electricity and Energy Rapid Supply (Special) Act, consultations with procurement experts led to the decision to proceed under the Public Procurement Act 2008.

The Division also says without an operations and maintenance contract in place, risks related to the site's care and custody would emerge once the engineering and consultancy contractors depart.

Long periods of inactivity could damage equipment, and the condition of the two lighterage vessels owned by the Bangladesh Shipping Corporation is deteriorating, with one already damaged by fire.

These vessels could soon require breakdown maintenance, potentially halting the oil unloading process, the summary says.

Given the urgency of the situation, the Division says a direct procurement route for the maintenance and operation work was essential to prevent further delays and ensure the continuity of fuel supply.