State-owned Bangladesh Petroleum Corporation is going to establish its second refinery at an estimated cost of over Tk 19,000 crore by its subsidiary Eastern Refinery Limited while the government policy is to discourage expensive project due to foreign currency crunch.
BPC had submitted a project proposal to the planning commission in January through the ERL for establishing the second refinery between July 2022 and June 2027, according to officials.
BPC that made profits of Tk 48,122 crore over the past eight years — until May 29, 2022 — by selling fuels at prices far higher than their buying rates, will bear the cost of the project from its coffer.
It has already signed a memorandum of understanding with Technip of France to establish the refinery aiming at refining about 30,00,000 tonnes of crude oil annually with its current capacity of 1,50,000 tonnes.
The BPC proposal contradicted the current government policy on development projects under the annual development programme in the wake of foreign currency crunch, said officials.
On July 3, the finance division in a directive suspended fund for low-priority projects while classifying the ADP projects into categories ‘A’, ‘B’ and ‘C’.
It also wanted ministries and divisions to discourage costly projects as the country’s foreign currency reserve has been under stress due to shortage of the US dollar.
The country’s forex fell below $37 billion in the past week from $48 billion in August 2021 creating pressure on the balance of payment.
The county’s current account balance recoded a deficit of $18 billion and the trade gap crossed $30 billion in FY2022.
The government has already sought loans from International Monetary Fund as BoP assistance.
A meeting by the planning commission was held on the BPC proposal on August 24.
Officials attending the meeting said that the finance ministry representative suggested suspending the project because of unfavourable financial situation in the country amid high inflation.
The representative doubted the BPC capacity to bear the project cost.
Besides, the year-wise requirement of foreign currency was sought by the representative amid the global financial crisis that is likely to linger in the coming years.
An ERL official said on Saturday that they would submit a revised proposal soon on the basis of planning commission observations.
He hoped that they could provide feasibility study, year-wise foreign currency requirement and proper estimate of the project components as sought by the planning commission.
The current refinery under the ERL was established in 1967.
In the past, BPC took a number of initiatives to increase the ERL crude oil refining capacity against the backdrop of growing demand for fuel oil in the country.
The country imported about 69,00,000 tonnes of fuel oil in FY22.
According to a BPC forecast, the country’s fuel oil demand will reach 80,30,000 tonnes in FY27 and 1,00,23,000 tonnes in FY30.