Crude oil refining costs up 82pc in a decade at lone public plant

• Eastern Refinery Limited meets nearly 20pc of the country’s total fuel demand

• Long operational life weighing on the old machinery and edging up utility prices mainly contributed to the refining cost escalation

The operational costs of Bangladesh Petroleum Corporation (BPC) for fuel oil keep surging as crude refining expenses at state-owned Eastern Refinery Limited (ERL) has spiralled by about 82 percent per lakh tonne in a decade.

Long operational life weighing on the old machinery and edging up utility prices mainly contributed to the refining cost escalation, according to authorities.       

But without any alternative in hand, BPC has to depend on the old and lone public refinery established in 1968, since refined oil imports are more expensive.  

Officials at the refinery also agree that there is a relation between the spiking processing costs and the plant's exhausted operational life.

"The repair, replacement and maintenance costs of the plant have been ticking up every year," Engineer MdLokman, managing director of ERL, said.   

"Besides, crude processing cost largely increased thanks to spiked utility bills such as gas, water and electricity over the years," he added.

The refinery processed around 13.42 lakh tonnes of crude oil at around Tk89.8 crore in the 2010-2011 fiscal year. The refining cost escalated to Tk131 crore in the 2019-20 fiscal year though the crude input dropped to around 10.78 lakh tonnes, marking about 81.61percentc hike in refining cost in a decade.

Engineer Lokman said BPC, the owner of the refinery, sets the crude processing cost considering the operational expenses. 

He claimed the plant still has enough efficiency as it set a record by refining 15 lakh tonnes of crude oil in the 2020-2021 fiscal year.

BPC Chairman ABM Azad said, "Crude processing cost does not depend on the plant's capacity alone. Rather government policy and crude input are also responsible for processing cost fluctuations."

With 16 types of products including diesel, petrol, octane and jet fuel, the refinery meets nearly 20percent of the country's total fuel demand.

In the 2019-2020 fiscal year, BPC spent Tk17,732crore for importing refined diesel, Jet-1 and furnace oil.

Second refining unit yet to see the light

BPC moved to establish another petroleum refinery unit with a 30-lakh tonne of crude handling capacity.

In January 2017, BPC signed a contract with a consortium of Technip France and TechnipGeoproduction, Malaysia.

As per the contract obligation, the front-end engineering design was completed in September 2018 and a bid document subsequently was handed over to Technip, France. Technip then submitted 611 bid queries in April 2019.

Since then, the project implementation has been stuck as the revised technical proposal is yet to be sent to Technip.