The state-owned Bangladesh Petroleum Corporation (BPC) is seeking $2-2.5 billion in funding from the Asian Infrastructure Investment Bank (AIIB) to implement the refinery expansion project-Eastern Refinery Ltd (ERL) Unit-2.
Recently, the BPC announced that they would construct Eastern Refinery Limited (ERL) Unit-2 with state funding but BPC Chairman Md Amin Ul Ahsan made the new announcement at a media briefing on June 30 at Chattogram BPC's head office.
AIIB is proposing an interest rate of around six percent, which is a costly fund for Bangladesh.
"We have already submitted a revised development project proposal with an estimated cost of Tk 42,000 crore (approximately $3.4 billion) to government for approval. We expect to receive $2-2.5 billion in financing from AIIB," BPC Chairman told the briefing.
Speaking about ERL Unit-2, the BPC chairman said the corporation will provide $1.5 million in funding for the project, while the rest will be financed by the government through annual budget allocations.
"Once the government finalises negotiations, BPC will proceed to invite bids," the chairman stated.
BPC told that the proposed unit will have the capacity to refine an additional 3 million tonnes of crude oil annually.
Originally estimated at Tk 24,000 crore in 2018, the project's cost has now surged to Tk 41,800-42,000 crore, driven by rising global material costs, the depreciation of the Bangladeshi Taka, and a stronger US dollar. ERL officials noted that earlier estimates did not account for consultancy fees, customs duties, and VAT, which have now been included.
According to the chairman, the project must be completed within five years of its commencement. He also clarified that the government will not compromise on project quality, and therefore is not considering ECA (Export Credit Agency) procurement models.
Power and Energy Adviser Muhammad Fauzul Kabir Khan told earlier that the government had decided to implement ERL Unit-2 under public funding and plans to invite bids by December 2025.
Initially, BPC drafted a $3.5 billion Development Project Proposal (DPP), but Adviser Khan noted that the cost estimates are now under review. Multiple international financial institutions-including AIIB, US EXIM, Chinese banks, and other multilateral agencies-have expressed interest in financing the project.
The Ministry of Finance has already approved a proposal from the Energy and Mineral Resources Division to fund the project publicly, following a recent meeting between Finance Adviser Dr. Salehuddin Ahmed and Power and Energy Adviser Muhammad Fauzul Kabir Khan.
Previously, BPC had committed to contributing $1.5 billion from its own resources. It has earmarked around Tk 15,000 crore from petroleum marketing profits and deposited an additional Tk 11,000 crore to the public exchequer.
"Once the funding is secured, we will move forward with the DPP (Development Project Proposal), " official said.
On the new refinery projects, BPC Chairman Amin Ul Ahsan said foreign investment is being sought for the refineries planned in Matarbari and Payra.
The ERL-2 project was previously cancelled by the interim government under the Special Powers and Energy Supply Act on August 29, 2024, when it was proposed as a joint venture with S Alam Group.
Country's lone refinery was constructed 56 years ago, it can refine just 1.5 million tonnes of crude oil, meeting only 20 per cent of the country's current demand. The new ERL-2 unit is expected to refine an additional 3 million tonnes, raising the total refining capacity to meet around 60 per cent of the country's needs.
