Bangladesh has floated an international tender to import petroleum products, doing away with the government-to-government (G2G) negotiations, to profit on a slumping global oil market.
“We want to procure of 9.875 million barrels (13,20,000 tonnes) of GASOIL and 1.440 million barrels of Jet A-1,” Bangladesh Petroleum Corporation Chairman AM Badrudduja told the Dhaka Tribune yesterday.
State-owned BPC incurred huge losses after introducing the G2G system in 2003-04. Yesterday, it floated a tender to import refined diesel (GASOIL) and Jet A-1. Bidders will be able to collect papers until February 18 and file quotations by February 22. Seven companies have already joined the fray.
The move comes at a time when the demand to cut oil prices in the local market is high.
Until 2003, the BPC imported petroleum products through tenders and negotiated premium rates –transportation, insurance and other costs- every six months. Recently, it imported refined diesel with a premium of $4.50 per barrel. Badrudduja said the government believed premium rate would be lower for importing oil through international tenders.
“It is a good decision,” Dhaka University geology teacher Prof Badrul Imam told the Dhaka Tribune. “This will bring transparency ... The premium, too, will come down.”
The Dhaka Tribune ran an exclusive report on May 22, 2013 on how BPC’s annual losses rose nearly 10 times in about 10 years after introducing G2G negotiations which aimed at “ensuring energy security and prevent procurement delays.”
G2G negotiations came into effect in 2005. Under the agreement, BPC closed minimum two-year deals with the oil companies. Before that, its losses were lower under the competitive market tender policy.
The BPC recently informed the Finance Division that the international firms would not be interested in continuing business with it because of the huge government loans shown in its balance sheet.
BPC Chairman Badrudduja sought Finance Division’s permission to turn state loans of Tk43,577.93 crore to equity of the corporation after Finance Minister AMA Muhith asked the Energy Division to cut oil prices.
The BPC has been importing about 5 million tonnes of fuel oil worth about $3 billion every year from 13 countries under the G2G deals. It made a profit of Tk3,500 crore in 2014-15 when oil plummeted between $40 and $50 per barrel from $117.
In 2011-12, it incurred a record Tk105.52bn loss. In 2003-04, the amount was Tk9.6bn. Badrudduja claimed that buying oil at high rates and selling it at low prices back home had led to the losses.
Oil prices have been hiked several times at home. BPC officials, declining to be named, said the rise in losses were due to multi-level commissions being added to oil prices and under-the-table deals between top BPC officials and agents of foreign state-owned oil companies in Bangladesh.
They claimed that the exporters awarded the agents if they made Bangladesh procure oil when the prices were high. They also benefited from manipulating marginal rise in the premium, between $0.1 and $0.5 per tonne. An average order amounts to the tune of 5 million tonnes.
