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Construction Of ERL Unit-2

MoU signing report submitted to BPC for modification

Published : Thursday, 23 May, 2024 at 12:00 AM  Count : 261

CHATTOGRAM, May 22: The seven-member committee has already finalised the report for signing MoU (Memorandum Of Understanding) with the S Alam Group for construction of the second unit of Eastern Refinery (ERL) under the Public Private Partnership with an estimated cost of Tk 40,000 crore.

The seven-member committee constituted by the state-owned Bangladesh Petroleum Corporation (BPC) has submitted the report for necessary modification.

The report of S Alam Group also submitted to the BPC for consultation, BPC sources said.

Earlier, the S Alam Group has submitted a proposal to BPC.

With the submission of proposal from S Alam Group in this regard, the BPC had constituted a seven-member committee on February 14 last headed by Md Khalid Ahmed, Director for Operations of BPC, comprising of three BPC officials, three ERL officials and the managing director of Padma Oil to take a negotiable status of a proposal of S Alam Group for construction of the second unit of ERL.

Negotiations will be completed after completing the technical and financial analysis, the modality of the joint venture, the management strategy and the equity portion.

S Alam Group sent in a proposal to the Prime Ministers Office in October last year to build the second unit of ERL under a joint venture on an 80-20 equity basis on the land owned by ERL in Chattogram.

S Alam Group also sent a draft letter of intent to the energy ministry on January 29 last. On the basis of S ALam Group proposal, the energy division on February 5, wrote to the Bangladesh Petroleum Corporation, the parent company of ERL, informing it about the decision resulting in the formation of a seven-member committee.

Earlier, the BPC had prepared a Development Project Proposal (DPP) for construction of the second unit of ERL that was submitted for approval by the Executive Committee of National Economic Council (ECNEC).

The total cost of the second unit of ERL has been estimated at TK 23,736 crore. Bangladesh Petroleum Corporation (BPC) will provide 30 per cent while the rest 70 per cent will be provided by the Government of Bangladesh.

The government in 2010 had decided to set up a new plant named Installation of ERL Unit-2 with an annual refining capacity of three million tonnes. At that time, the projects estimated cost was Tk 13,000 crore. The project cost has gone up at least 10 times since 2010. Now the estimated cost is around Tk 23,736 crore.

Meanwhile, the country has been losing a huge amount of taka for delay in the implementation of the second unit. Only the state owned BPC is presently importing both crude and refined petroleum from foreign countries. Crude petroleum is supplied to ERL for refining while the refined petroleum products are directly supplied to three marketing companies of the country, Padma, Meghna and Jamuna oil Companies.

Established in 1968, the ERL at Patenga in Chattogram can currently refine 1.5 million tonnes of crude oil per annum. At present, ERL is meeting only 20% of the countrys demand for petroleum products. The rest of the demand has to be met by importing refined oil at a higher price. To meet the increasing demand for fuel oil in the domestic market, the government took up the "Installation of ERL Unit 2" project a decade ago.

According to BPC projections, the countrys demand for petroleum products will stand at 8.03 million tonnes in the fiscal year 2026-27.  In contrast, the total production of ERL and ERL-2 will be 4.5 million metric tonnes. As a result, there will be a shortfall of around 3.53 million tonnes with the demand for petroleum products.

According to the initial proposal by the ERL, the second unit was supposed to have the capacity to refine 30 lakh tonnes of oil.

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