Eastern Refinery Limited (ERL), under Bangladesh Petroleum Corporation (BPC) as a subsidiary, undertook a project to increase the country’s petroleum refining capacity through building a second unit, ERL-2.
However, the project has not been launched even in 12 years.
Officials said, the country's only state-owned petroleum oil refinery, ERL, started its commercial production in 1968 with an annual refining capacity of 1.5 million metric tons per year. However, its capacity has not increased till now. In contrast, current demand for petroleum products stands at nearly 6.5 million metric tons per year.
In order to ensure energy security, the government decided to build the second unit “Eastern Refinery Unit-2” having 3.0 million tonnes of Crude Oil processing capacity in Chattogram.
BPC conceived the idea of ERL Unit-2 in 2010, with an estimated project cost of Tk13,000 crore. Then, the cost was increased to Tk16,739 crore in a revised proposal. But now, the cost may cross Tk 18,000 crore.
In addition to increasing the cost, the duration of the project has been extended two times and now the deadline has been fixed till 2026. But as the DPP of the project has not been finalized yet, there are still fears that the project will not complete during the extended period.
The development project proposal (DPP) relating to the second unit had been amended for the 10th time recently. The final proposal has been sent to the ministry. But it has not been approved yet.
The last DPP of the project was submitted to the ministry in 2018 setting the project’s implementation tenure from January 2021 to December 2024.
The whole process of implementation of the ERL-2 is being done under the Speedy Power and Energy Supply (Special) Act 2010 which allows this ministry to award any contract to any company without completing the bidding process.
Md. Mostafizur Rahman, deputy general manager (planning and shipping) of ERL and the project director told Bangladesh Post, ‘We have already completed the basic design of the project. Besides, a new DPP was submitted to the Energy and Mineral Resources Division (EMRD) seeking approval in January last. After getting the approval, ‘Detail Engineering Design’ and contractor for Engineering Procurement and Construction (EPC) will be appointed. Even after DPP approval, it will take five years to complete the project.’
However, when asked about the delay in the project, he could not give a specific explanation.
‘The Prime Minister directed to appoint Technip, a French engineering company, as EPC contractor. They have already submitted a proposal. But we could not agree with them on some technical issues. A note in this regard will be prepared and sent from the Ministry to the Prime Minister's Office. The EPC contractor will be finalized after receiving the report from there,’ he added.
BPC has signed a contract agreement with Technip, for creating front end engineering design for the proposed ERL unit-2 on 18 January, 2017 with estimated cost at taka 371.81 crore. Technip also designed and installed an existing unit of ERL back in 1968.
An official said “Techmip has placed some 650 observations and we addressed most of them. Negotiations are going on to settle the remaining 175 of them. Once the technical negotiations are completed, the financial offer of the Technip will be opened for final negotiation to go for a contract.”
The BPC officials also informed that the project’s environmental impact assessment (EIA) was completed much before and they received clearance from the Department of Environment (DoE) for the project. Besides, around 64 acres of land has already been leased under long term agreement for the implementation of the project.
Sources said, despite various initiatives to implement the project from the higher echelons of the government, the responsible officials could not start the work of the project.
They claimed the ministry of energy is upset with the officials involved in the construction of new projects of BPC and ERL over the delay.
In April, 2016, BPC hired Indian company Engineers India Limited (EIL) for rendering the Project Management Consultancy (“PMC”) for installation of ERL Unit-2 at a contract.
At the signing ceremony, State Minister for Power, Energy and Mineral Resources Nasrul Hamid had said work on the ERL-2 project would begin by 2017. The state minister again announced the start of the work on the project soon on 7 May 2018 on the occasion of the golden jubilee of the ERL in Chattogram.
Later, on 6 September 2020, the state minister expressed his dissatisfaction with the progress of the project at an online review meeting of the BPC's ongoing development projects.
At the meeting, he said the ministry would not take responsibility for the increase in project cost due to the failure and incompetence of project managers.
He also instructed that monitoring be intensified to expedite the work of the project. Following the directive of the state minister, the managing director of Eastern Lubricants Blenders Limited (ELBL), Md Lokman, was appointed managing director of Eastern Refinery Limited on 8 January this year.
According to sources, if the government implements this project, the private sector refineries will have to do business in a competitive market. Due to such reasons the BPC could not start work on the project even after a decade.
