Tuesday, 16 July, 2024, Reg No- 06
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ERL-2 unit likely to be constructed under PPP with S Alam Group

Published : Saturday, 9 March, 2024 at 12:00 AM  Count : 312

CHATTOGRAM, Mar 8: The state-owned Bangladesh Petroleum Corporation (BPC) is going to set up the second unit of Eastern Refinery (ERL) under Public Private Partnership (PPP) with the industrial conglomerate S Alam Group with an estimated cost of Tk 40,000 crore.

With the submission of proposal from S Alam Group in this regard, the BPC had constituted a seven-member committee on February14 headed by Md Khalid Ahmed, Director for Operations of BPC which was supposed to submit the report on March 14.

But, BPC sources said the committee could not make any headway in this connection and will likely seek extension of date for submission of report on the construction of the second unit of the ERL.

The committee, headed by Md Khalid Ahmed, Director for Operations of BPC comprise three BPC officials, three ERL officials and the Managing Director of Padma Oil, will negotiate on the proposal of S Alam Group for the construction of the second unit of ERL.

But the committee could not complete the report. So, the committee may seek extension of the negotiation time, BPC sources said.

Negotiations will be completed after completing the technical and financial analysis, the modality of the joint venture, the management strategy and the equity portion.

The industrial conglomerate S Alam Group sent a proposal to the Prime Ministers Office in October last year to build the second unit of ERL under a joint venture on an 80-20 equity basis on the land owned by ERL in Chattogram.

S Alam Group also sent a letter of intent to the Energy Ministry on January 29.

On the basis of S ALam Groups proposal, the Energy Division on February 5, wrote to the BPC, the parent company of ERL, informing it about the decision resulting in the formation of a seven-member committee.

The total cost of the second unit of ERL has been enhanced to Tk 23,736 crore over the earlier estimated cost of Tk 23,059 crore in the fresh DPP. As a result, the cost of the project has increased by around Tk 677 crore.

The Planning Commission had fixed Tk 23,059 crore for the implementation of the project. Of the total cost, the BPC will provide 30 per cent while the rest 70 per cent will be provided by the government.

The government in 2010 had decided to set up a new plant named Installation of ERL unit-2 with an annual refining capacity of three million tonnes.

At that time, the projects estimated cost was Tk 13,000 crore. The project cost has gone up at least 10 times since 2010. Now the estimated cost is around Tk 23,736 crore.

Meanwhile, the country has been losing a huge amount of money for the delay in the implementation of the second unit. Only the state-owned BPC is presently importing both crude and refined petroleum from foreign countries.

Crude petroleum is supplied to ERL for refining while the refined petroleum products are directly supplied to three marketing companies of the country, Padma, Meghna and Jamuna oil companies.

Established in 1968, the ERL at Patenga in Chattogram can currently refine 1.5 million tonnes of crude oil per annum. At present, ERL is meeting only 20 per cent of the countrys demand for petroleum products.

The rest of the demand has to be met by importing refined oil at a higher price.

To meet the increasing demand for fuel oil in the domestic market, the government took up the "Installation of ERL Unit 2" project a decade ago.

According to BPC projections, the countrys demand for petroleum products will stand at 8.03 million tonnes in the fiscal year 2026-27.  

In contrast, the total production of ERL and ERL-2 will be 4.5 million metric tons. As a result, there will be a shortfall of around 3.53 million tonnes with the demand for petroleum products.

Meanwhile, S Alam Group estimated that over Tk 40,000 crore of investment will be needed to build the refinery.

According to the initial proposal by the ERL, the second unit was supposed to have the capacity to refine 30 lakh tonnes of oil.

S Alam Group said the refinery will have the capacity to refine up to 50 lakh tonnes of crude oil.

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