• Monday, Sep 20, 2021
  • Last Update : 03:39 am

Bashundhara’s mega oil refinery will reduce import, cost of gas

  • Published at 07:12 pm July 28th, 2021
eastern-oil-refinery

The mega plant is expected to meet about 80% of the national demand for refined oil

Bashundhara Oil and Gas Company Limited, a subsidiary of one of the biggest conglomerates of the country announced that they are constructing a mega oil refinery in Sitakunda upazila in Chattogram back in mid-2018. 

The plant is being constructed on 220 acres of land in the port city and the project is expected to be completed by next year, but many suspect that it might be delayed as the number of coronavirus cases are on the rise and lockdown measures are still ongoing. 

However, this project has been creating new hopes in the energy sector as imports of refined oil are likely to come down. It is also creating 700 more jobs which are essential in a post-pandemic situation.


Also Read - Padma Oil teams up with Bashundhara and Petromax to sell autogas


The mega plant is expected to meet about 80% of the national demand for refined oil and that isn't cheap for Bashundhara Group. 

The project is going to cost Tk10,000 crore and a total of 15 public and private banks are putting their efforts to arrange the funds through the syndicated loan with the Agrani Bank Limited acting as the lead arranger. 

Agrani, Janata and Sonali banks contributed over Tk1,500 crore and Islami Bank Bangladesh another Tk1,500 crore. 

According to insiders, the company plans to refine one lakh barrels of crude oil a day, meaning they will end up producing 4.7 million tons of petroleum oil per annum. 

The refinery will produce refined liquefied petroleum gas (LPG), diesel, gasoline, furnace oil and jet fuel. As the demand for petroleum oil increases every year with more factories and manufacturing hubs popping up, it is essential to meet the local demand as imported refined oil can be extremely expensive. 

An estimate by the Japan International Cooperation Agency shows the demand for refined fuel in Bangladesh will reach 30 million tons by 2041.

This project has witnessed the largest syndicated loan arrangement in the country’s banking sector, for which many have raised eyebrows regarding the repayments of the loaned amount. The loaned amount is to be paid over 11 years according to the project documents. 

Before this, GPH Ispat Limited mobilized a syndicated loan worth Tk1,280 crore.

Insiders of the banking industry suggest that it’s not too much of a high risk as the government will be one of its customers which ensures sales of the final output that the mega refinery is going to produce. 

Only last month, Bashundhara Group has made huge strides in the petrochemical sector with huge developments taking place. The company signed an agreement with state-owned Jamuna Oil Company Limited where they will supply LPG to all the autogas stations of Jamuna Oil. 

As per the agreement, both the companies will work on expanding the market of international standard autogas, gradually replacing the traditional fuel which is both expensive for the consumers and harmful for the environment. 

It can be expected that the agreement was done in line with the upcoming plant that is also going to refine LPG.

The local demand for petroleum oil is currently around 6 million tons per year. Only 20% of that is being met by locally producing them while the rest is imported. 

State-run Eastern Refinery Limited (ERL), which is under Bangladesh Petroleum Corporation (BPC) is also producing refined fuel from crude oil, but the capacity of the unit is a mere 1.2 million tons a year. 

There have been many reports that the equipment that Eastern Refinery is using at present is over half a century old and only meets about one-fifth of the total demand. 

This has caused an overwhelming rise in the cost of production as repair works and equipment replacements are a constant headache for the state-owned company. 

To put things in perspective, the cost of refining 1.2 million tons in the 2009-2010 fiscal year was Tk80.16 crore, whereas nine years later, in the fiscal year 2018-2019, the cost of refining 1.1 million tons was a staggering Tk138.85 crore. 

Not only has it become costlier, but there are also other problems that arise with using such old equipment, such as poor quality of output. 

On top of that, older machines mean it’s inefficient and not very environmentally friendly. Even though there were initiatives taken to increase plant capacity to 3 million tons a year, the project has seen little progress since 2010.

Also last year, the leading conglomerate launched the country’s first private bitumen plant, located at Pangoan of Keraniganj in Dhaka. 

Bitumen, or sometimes known as asphalt, is a substance produced through the distillation of crude oil and is an essential component in road construction. 

The only other existing bitumen plant was the state-owned Eastern Refinery Limited, which was only producing 70,000 tons a year, a little over 10% of the local demand. 


Also Read - Bashundhara launches country's first bitumen plant


Currently, Bangladesh consumes around half a million tons per year, forcing the country to import heavily when it comes to bitumen as petroleum oil refineries have low production capacities. 

The bitumen plant is situated over 63 acres of land and has a total production capacity of nine lakh tons, which is enough capacity to meet the local demand. To expand its production capacity and to keep up with the increasing demand in the near future, Bashundhara’s upcoming new mega plant is also going to contribute to the production of bitumen as the demand for it is increasing 10% to 15% yearly.

This says a lot about the potential in the market for petroleum oil refineries as there is a lot to be done in the industry, especially with the help of investments by the private sector. 

With business-friendly policies being taken by the current government, economists and businessmen observe that the dependence on foreign products, especially refined oil will eventually come down. 

Bangladesh Petroleum Corporation currently imports petroleum products from around a dozen of global suppliers that includes Saudi Aramco, Emirates National Oil Company of Singapore, Petrochina, ADNOC, PETCO Trading Labuan Company Limited (PTLCL), P.T Bumi Siak Pusako (BSP), Unipec Singapore Pte Limited, PTT International Trading and Numaligar Refinery Limited (NRL).

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