Where Is Bangladesh's 2nd Refinery?
02.13.2023 By TankTerminals.com - NEWS

February 10, 2023 [The Financial Express] – The fact that Bangladesh has no second oil refinery is a mystery that has been plaguing energy experts for more than half a century.

 

The country’s lone refinery was set up in pre-independence era. While the country’s economy has grown to a nearly half a trillion-dollar size and demand for oil-based products has grown by leaps and bounds, Bangladesh remains hamstrung by its lack of capacity to refine the oil it needs to sustain the economy from a self-reliance point of view.

People seem to have developed a false notion that imported goods are better than those produced in the country. While the rest of the world has moved decisively to secure energy sources as a matter of national priority and security, Bangladesh has moved in the opposite direction. Today, the common people have to bear the brunt of these self-destructive policies.

Going by reports published in domestic media over the years, the sole refinery continues to be overhauled and despite being done so some ten times or so, there is a limit to how long it can continue operating.

Indeed, industry insiders are unanimous that the failure to build crude-refining capacity in the country since independence has meant that the national exchequer has had to dish out millions in foreign exchange to import refined oil from foreign markets. Why? The answer is plain to see. Commissions are paid, hefty profits are made – all to the detriment not only to the government purse but also to fatten up both State entities and private parties involved in the trade.

So much has happened in terms of growth. Today, there is a vibrant transport sector, agriculture has moved to a stage when Bangladesh is arguably self-reliant in food, industry today employs millions of people and the country has become the second largest exporter of apparels. Ceramics, construction, pharmaceuticals, ship-building, all are coming of age slowly.

Everything needs one form of energy or other, and Bangladesh is increasingly becoming a nation of import-only energy, which has exposed its soft belly after the Russo-Ukrainian war erupted. While smart countries like China, India and even a number of nations in the EU have (or used to until very recently) snapped up Russian crude oil at extremely competitive prices to refine the same in their respective countries, Bangladesh was left high-and-dry because of both a lack of vision and to serve the purpose of self-seeking businesses.

It is evident, from a report published in this newspaper on February 8, the Bangladesh Petroleum Corporation (BPC) “imported around 3.30 tonnes of refined and crude oils combined during fiscal year 2001-02 at a total cost of around Tk38.13 billion.

After one decade, during FY2010-11, the corporation imported a total of 4.90 million tonnes of refined and crude oils combined, of which 3.50 million tonnes are refined and 1.40 million tonnes crude. The aggregate cost was around Tk276.62 billion.” As the country fast forwarded to FY2020-21, we have both public and private sector imports of oil, and the import cost has ballooned to stupendous amounts.

Procastination at the policy level coupled with pressure from vested interests in the private sector that have been milking the national exchequer for decades seem to have all been loathe to allow space for a 2nd refinery to be set up.

The facts speak for themselves. Today, the BPC imports 4.15 million tonnes of refined oil which carries a price tag of around Tk220 billion ($2.0 billion approximately).

Things started to look up when a French company Technip was contracted to design and build a 2nd refinery. Things unfortunately went sour after a few years had been wasted. Whatever the reason, Technip had carried out the front-end engineering and design (FEED) for the new refinery. The question is why it had taken several years for negotiations and why an unsolicited deal took so long to conclude.

Why did it take the BPC years to come to the conclusion that terms set by Technip were not suitable? One would think that given the increasingly desperate situation the country faces in terms of sourcing adequate energy by the economy, the unsolicited deal would have been expedited at record speed.

Since, so many such unsolicited deals have been made at record speed in the past, what could have held this one up for so many years?

Now that the company has left, the country is back to square one. While India and China have literally saved billions of dollars by picking up millions of barrels of Russian crude oil (at discounted prices) since the war in Europe began, Bangladesh continues to limp along with news of buying the odd cargo of LNG every now and then, while the economy continues to contract.

The case of failure to build and commission the 2nd refinery can be a bitter lesson of wilfully handing over its national energy needs to foreign powers. It would make a fine case study about a lack of negotiation skills and a lack of contracts management knowledge which together can deal a crippling blow to an economy.

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