Bangladesh Scraps Refinery Expansion, Opting for Larger Greenfield Project

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Shortly after cancelling a project for the expansion of the Eastern Refinery Limited (ERL), the state-owned Bangladesh Petroleum Corporation (BPC) (Dhaka, Bangladesh), is making plans to set up a new greenfield oil refinery.

ERL, a subsidiary of BPC, was built at Patenga near Chittagong Port in 1968, and is the sole importer and distributor of petroleum products and crude oil in Bangladesh. ERL is also a corporate wing of the Ministry of Power, Energy and Mineral Resources.

A joint venture proposal was submitted in July 2011 by the German IEL Consortium & Associates Limited (IEL) and the local Orion Group of Bangladesh. It was for a $1.3 billion project, which was designed to triple the production capacity of ERL from 1.5 million tons to 4.5 million tons annually. BPC said they cancelled the project as the partners failed to engage a genuine financial guarantor, according to the local Financial Express.

BPC now says that the project for the balancing, modernizing, rehabilitation and expansion of ERL was no longer feasible for the 45-year-old refinery--where costs for the project could have escalated to more than $2 billion.

A new plan is being formulated to set up a new refinery, and foreign investment and expertise is being sought. Discussions have taken place with Kuwait Petroleum International (KPI) (Salhiya, Kuwait), concerning the construction of a refinery in a joint venture. KPI is now conducting a feasibility study on the construction of a refinery with an annual capacity of 5 million tons. Bangladesh needs the new refinery to meet the greater part of annual demand of up to 6 million tons.

Bangladesh Petroleum Exploration and Production Company (Bapex) has recently discovered 137 million barrels of new oil reserves, and 55 million of them are recoverable. It would take five years to refine them at ERL.

In the current fiscal year (2012-13), BPC expects to import about 5.9 million tons of crude oil and refined products combined, which is an increase of 11.3% from the 5.3 million tons in the previous year.

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