Govt fails to attract any investor for Eastern Refinery expansion

Government failed to attract any investor to implement the TK Tk23,000 crore  "Modernisation and Expansion of Eastern Refinery Limited (ERL 2)" project to refine at least 6 million tonnes more crude oil in the country for meeting its growing demand of liquid fuel.

Following the failure, Bangladesh Petroleum Corporation (BPC) once again submitted the proposal to the planning commission, the Ministry of Energy Division has submitted the project,  however, the project's total cost has been revised up to Tk42,973.70 crore. Project proposal has said that Tk30,499.80 crore will come from the government's own funds and Tk12,473.90 crore from the Bangladesh Petroleum Corporation (BPC). 

The government is still in dialogue with partners including the Islamic Development Bank (IDB) and other Middle Eastern countries and organisations.  Even the Chief Adviser's office sought financial assistance from Saudi Arabia and other Middle Eastern partners, but no commitments were secured.  Now government plans to fund the projects from its own.

Bangladesh's demand stands to 7.5 million tonnes liquid fuel per year, as the ERL have the capacity 1.5 million tones refine capacity thus country to import costly refined fuel instead of processing cheaper crude oil domestically. And spending around Tk10,000 crore annually to refine crude oil.

Bangladesh Petroleum Corporation (BPC), establish its first unit in 1968 although and it air marked huge areas for its expansion, it never takes any initiative for its expansion rather it was reluctant to install the second unit.

In 2010, government plans for ERL and proposed Tk13,000 crore for the project in 2013 but it failed to move forward. BPC has taken up the project in 2022 to self-finance the project.

After the interim government took over, BPC revived the project, estimated cost soared to Tk36,410 crore.

"Now government needs to self-finance Tk43,000cr Eastern Refinery 2 as foreign funding falls," a senior official of the Planning Ministry has said preferring anonymity.

Those responsible for delaying ERL-2 have cost the country billions. Their assets should be confiscated to recover the losses, Shamsul Alam, energy adviser to the Consumers Association of Bangladesh (CAB) said earlier.

The total cost of ERL-2 construction is estimated at Tk 36,410 crore. Of which, the government plans to secure Tk25,500 crore in foreign loans from various development partners. BPC will bear the remaining expenses. 

To facilitate foreign financing, BPC has submitted a new Preliminary Development Project Proposal (PDPP) to the Economic Relations Division (ERD) after receiving policy approval from the Planning Commission.

The project has also been renamed from Installation of ERL Unit-2 to Modernisation and Expansion of Eastern Refinery Limited (ERL).