ERL-2 project faces fresh delay as PMC tender cancelled

CHATTOGRAM, Oct 22: The long-delayed Eastern Refinery-2 (ERL-2) project has suffered another setback as the government has cancelled the international tender for appointing a project management consultant (PMC), ordering a fresh tender to ensure greater competition and transparency.

In a letter sent to Bangladesh Petroleum Corporation (BPC) chairman on October 19, the Department of Energy and Mineral Resources directed the corporation to invite fresh expressions of interest in line with the Public Procurement Rules (PPR), 2025, and re-evaluate the terms of reference for the consultant.

The previous tender, invited for consultancy services for the engineering, procurement and construction (EPC) works of the Modernisation and Expansion of Eastern Refinery Limited project, closed on July 20. A total of 23 expressions of interest were submitted, of which five firms were shortlisted for final approval on October 20.

Joint Secretary and Project Director Asma Ara Begum told the Daily Observer on Thursday that a fresh tender would be invited in the first week of November.

“This time, 21 days will be given for submission. We are hopeful of appointing the consultant within the next three months,” she said, adding that the project was expected to be completed by 2030.

She said the cancellation was likely intended to attract more companies and ensure a competitive selection process. Firms that participated in the previous round would also be eligible to apply. She added that other project activities were continuing and the change would not significantly affect overall implementation.

Established in Patenga in 1968, Eastern Refinery Limited is the country’s only state-owned oil refinery, with an annual crude oil processing capacity of 1.5 million tonnes. Bangladesh’s annual fuel oil demand is around 7.2 million tonnes, while a substantial volume of refined petroleum products is imported, increasing pressure on foreign exchange reserves.

BPC estimates that raising domestic refining capacity to 4.5 million tonnes a year could save about $473 million, or Tk5,788 crore, annually.

The ERL-2 project was first taken up in 2012 to add another 3 million tonnes of annual refining capacity. A Tk13,000 crore plan was initiated in 2013, but delays over design, consultancy, financing and implementation prevented progress. BPC later considered financing the project itself, raising the estimated cost to Tk23,000 crore in 2022.

In 2024, S Alam Group offered to build the refinery for Tk25,000 crore, and the project was approved on July 9. It was suspended in August following the mass uprising that toppled the Sheikh Hasina government.

The interim government subsequently revived the project amid changing cost estimates and financing arrangements. A revised proposal putting the cost at Tk31,000 crore, down from Tk35,465 crore, was submitted to the Planning Commission. The Executive Committee of the National Economic Council conditionally approved it on December 23, 2025, asking for a review of engineering, design, construction supervision, commissioning and associated infrastructure costs.

The government has also approved a $1.004 billion loan from the Islamic Development Bank to finance the project. The financing is planned in two phases, with $520.6 million in the first phase and $483 million in the second, alongside a technical assistance grant.

Once completed, the second refinery unit is expected to raise total annual processing capacity to 4.5 million tonnes and produce Euro-5-standard fuels, reducing dependence on imported refined petroleum products.