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Bangladesh - November 22, 2023

Fuel oil business going to private sector

Gazette issued yesterday

Mahfuja Mukul: The government brought major changes in the policies related to crude oil import, refining, marketing and storage. In the existing policy, the state had sole control in these cases. From now on, the private sector has also been given the opportunity to import, refine and market fuel oil. For this reason, the government has issued a policy titled ‘Establishment of Refineries at the Private Level, Storage, Processing, Transportation and Marketing of Crude Fuel Oil Imported Policy-2023’.
The policy was gazette yesterday. However, it has been shown to be effective from November 15. Through this policy, the government ended its sole control in the fuel oil business. At present, the state-owned Eastern Refinery has sole capacity to refine fuel oil.
And the power of oil import and marketing rests with the state-owned Bangladesh Petroleum Corporation (BPC). However, after setting up private sector refineries, both companies will lose the single market for oil import, refining and marketing.
The government has also given special opportunities to encourage investment in the private sector under the policy. BPC will buy 60 percent of diesel, petrol, octane, jet fuel, furnace oil in the first three years after the start of marketing of the produced fuel oil. The state-owned company will buy 50 percent of refined fuel oil in the next two years.
According to the policy, diesel, octane, petrol, jet fuel, furnace oil produced in private refineries must be supplied to BPC at the government-fixed price of 60 percent of the total fuel oil produced in the first 3 years after the start of marketing. The remaining 40 percent of fuel oil can be sold under its own management and through its own registered marketing network. However, if a private refinery is unable to sell the remaining 40 percent oil due to lack of sales network, it can sell any amount to BPC. But it should be informed to BPC two months in advance and BPC will contract to buy it as per its demand.
In the next 2 years, private refineries will be able to sell maximum 50 percent of their produced oil under their own management. Or BPC and private refinery will determine the amount through purchase and sale agreement. However, if there is no demand from BPC, private refinery owners can also export refined fuel oil abroad subject to the organization’s no-objection.
Private entrepreneurs can set up petrol pumps on roads, highways, upazilas and metropolitan areas nationwide to sell their produced fuel oil. Fuel oil can be sold at the retail price fixed by the government at these petrol pumps. And the private refineries should set up a refinery with a capacity of at least 15 lakh metric tons per year.
According to BPC sources, currently the demand of fuel oil in the country is about 7 million metric tons. That is, if five private refineries are established, the entire demand of the country can be met. In this state-owned company Eastern Refinery will not have to refine any oil. In other words, like the power sector, government refineries will sit and BPC will have to buy oil from the private sector. Again, if the private refineries themselves start selling oil by setting up petrol pumps, the business of BPC will be destroyed. Therefore, the concerned people think that this suicidal decision should be cancelled.
Although no official of Eastern Refinery and BPC agreed to give any official comment regarding this policy.
Incidentally, since the independence of the country, the state-owned BPC has been managing the supply of fuel oil on behalf of the government. BPC is the country’s only oil refining company established in 1968 by importing crude oil and refining it at the Eastern Refinery. The refinery has an annual refining capacity of 1.5 million tonnes, which can meet 20 percent of the country’s total demand. The remaining 80 percent of the country’s fuel oil demand is met through imports of refined oil.
To increase capacity, BPC has taken up the project of setting up Eastern Refinery Unit-II at a cost of about Tk 23 thousand crores, which will be completed in 2027. If this happens, it will be possible to refine 3 million metric tons of crude fuel oil. However, this investment of BPC will be at risk after setting up the refinery in the private sector.
Officials of the Energy Department said that according to the powers and instructions given in various laws and regulations such as Bangladesh Petroleum Corporation Act-2016 and National Energy Policy 1996, policies for setting up refineries at the private level have been formulated.
Eligibility conditions of private entrepreneurs: The policy states about the mandatory qualifications of private entrepreneurs, entrepreneurs must have practical experience in the energy products sector. For this reason, joint investment opportunity with any foreign company has been given. Besides, the annual turnover of private entrepreneurial organization should be at least Tk 5000 crore or equivalent in US dollars in any 3 years out of the last 5 years.
A private entrepreneurial organization or any of its directors cannot be insolvent. The policy also states that the private sector must have at least 80 acres of land to set up a refinery and have a storage facility with a minimum capacity of 2 lakh tonnes for the operations of the refinery.
After getting the final approval to set up the refinery, the private entrepreneur will have to give a bank guarantee of Tk 250 crore in favor of BPC as a security guarantee before starting commercial operations. Lighterage vessels, coastal tankers and tankers should be owned or managed after importation of crude oil.

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