Saudi Arabia's $2.5 Billion Bangladesh Refinery Could Ease Heavy Import Bill

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Written by Richard Finlayson, Senior International Editor got Industrial Info Resources (Sugar Land, Texas)--Saudi Aramco has made a proposal to the Bangladeshi government's economic relations division to build a refinery in Bangladesh with an estimated investment of $25 billion. The capacity of the refinery will be 7 million to 8 million tons per year, or 145,000 to 165,000 barrels per day (BBL/d).

The capacity of the new refinery would be five times greater than the country's Eastern Refinery Limited (ERL) (Chittagong), which has an annual capacity of 1.4 million tons of crude, or 30,000 BBL/d. ERL has plans under way to increase capacity to 90,000 BBL/d with an investment of $1 billion. There has been no official comment as to whether the new proposed refinery would affect these plans. For related information, see September 1, 2011, article - Bangladesh's Beximco and Saudi Arabia's Marasel to Bid for Eastern Refinery Expansion Project.

An energy ministry official said that the government had received Saudi Aramco's proposal to build a refinery, with the Saudis providing the funding. The ministry is now scrutinizing the proposal with a view to making a decision shortly.

The official said that some of the refined petroleum output would be supplied to the local market and that the balance would be exported.

Saudi Aramco is currently a regular supplier of crude oil to ERL, a subsidiary of state-owned Bangladesh Petroleum Corporation (BPC). The refiner had imported 518,000 tons of crude from the company in the year up to September 2011. BPC also imports crude from the UAE's Abu Dhabi National Oil Company and had imported 382,000 tons from that source in the same period this year.

BPC plans to import 700,000 tons of Arab light crude in 2012. A total of 1.4 million tons of imported crude will be required in 2012, which is an increase of 12% on 2011 imports of 1.25 million tons. The amount of imported crude was reduced this year on account of a 45-day scheduled maintenance. For related information, see August 30, 2011, article - Petroleum Production in Bangladesh May Cease as ERL Plans Turnaround at Chittagong Refinery.

BPC estimates that it will need about 6.5 million tons of refined petroleum products in the 2011-12 fiscal year, which is 27.45% up on the previous year. In the current year, BPC will pay $6.2 billion for petroleum product imports, which is a 53% increase from the previous year.

These numbers are a good fit with the proposed Aramco refinery's capacity and output. Boosting domestic supplies would ease the pressure on import costs. BPC is a possible stakeholder in the new refinery if the project goes ahead.

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