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Bangladesh - World wide - October 1, 2022

Refinery modernization can reduce fuel oil price

Mahfuz Emran: The price of fuel oil is now the highest in the history of Bangladesh. Due to the Russia-Ukraine war, the price of fuel oil in Bangladesh has increased by more than 40 percent. Alternative sources continue to be sought after the crisis. But the bottleneck there is the capacity of our refinery. Experts say that the only refinery in the country is very old. Modernizing it will reduce system losses. The total cost of production will decrease. Then it will be possible to supply fuel oil at a low price.
According to various international websites, diesel has been sold in 34 countries at a lower price than Bangladesh till September 19. These include countries like Pakistan, Russia, Taiwan, Syria, Oman, Qatar, Bahrain, Malaysia, Egypt, Kuwait, Algeria, Saudi Arabia. Iran is giving oil to the people of the country at the lowest price. Many of these countries are producing their own oil, while others like Bangladesh are importing and supplying oil at low prices.
According to the international media, due to the effect of the Ukraine-Russia war, the price of fuel oil in the world market increased to 139 dollars per barrel at one stage. Since the beginning of August, the price of fuel oil has been falling in the international market. Currently, the price of crude oil per barrel (159 liters) in the international market is less than 86 dollars.
Dr. Amirul Islam, an associate professor and energy expert at the Military Institute of Science and Technology (MIST) works with fuel oil in Bangladesh.
He told that one of the reasons for the price increase in buying crude oil from the international market and selling it in the Bangladesh market is the cost of refining. Compared to other countries, refining Due to high consumption, the price of oil is also falling in the country’s market.
Eastern Refinery Limited, the only refinery in the country, is old and weak, so a lot of crude oil is wasted in the refinery. As a result, the price of crude oil is increasing due to the low availability of crude oil.
According to the information provided by him, the import cost of diesel including crude oil buying and refining is Tk 59 thousand 106 crores, the import cost of jet fuel is Tk 5 thousand 116 crores, the import cost of octane and petrol is Tk 5 thousand 308 crores and the import cost of furnace oil is Tk 2 thousand 256 crores. The total import cost is Tk 71 thousand 786.6 crore.
He also said that buying and refining one barrel (159 liters) of crude oil in a modern refinery costs 10,500 Bangladeshi Taka. From which diesel is 127 liters or 80 percent of the barrel. On the other hand, 32 liters of octane, petrol, kerosene, jet fuel is available, which is 20 percent. If you calculate the cost, the production cost of diesel is only Tk 60 per liter. On the other hand, production cost of octane, petrol, kerosene, jet fuel is Tk 90 per litre.
This expert said, if we compare the eastern refinery with a modern refinery, we see that the cost of refining one barrel (159 liters) of crude oil is Tk 10,160. Among them, diesel is only 41 to a maximum of 46.5 percent or 74 liters. On the other hand, octane, petrol, kerosene, jet fuel, bitumen and furnace oil are 42 liters, which is 26.5 percent of the barrel. The remaining 43 liters per barrel is wasted due to refinery inefficiencies, which is 27 percent.
Due to this 27 percent wastage, its cost falls on the remaining 72 percent. The production cost of diesel is Tk 120 per litre. Production cost of octane, petrol, jet fuel falls to Tk 130 per litre.
According to sources, 1.5 million tonnes of crude oil is refined annually in the Eastern Refinery. Of this, naphtha production is 1 lakh 43 thousand 561 tons or 9.5 percent. A total of 1 lakh 85 thousand 256 lakh tons of crude oil is wasted in the refinery, which is worth about 1 thousand 370 crore taka.
Dr. Amirul Islam said, if a modern refinery was established, a huge amount of foreign currency would have been saved, which is now necessary. Just because of the wastage in the refinery, our costs are increasing.
Managing Director of Eastern Refinery Ltd. Lokman told, we really need a refinery. In which we are refining, its age is not reduced.
Stating that the problem will be solved if ERL-2 is completed, he said that the plan which was taken in 2012 is being implemented. If that is the case, many of our problems will be solved. There is not only Arabian Light or Marban crude, but any equivalent crude from wherever it can be refined is being worked on.
In the context of oil wastage or loss, he said, it is not a matter of loss. We have done a lot of work on the old one as well. That is giving us roughly 100% refinement now. Our new unit will be updated from here. What is not refined in ERL-1 will be refined in Unit-II. Again, many things from the second unit will also be used in the old one.
Dr. Amirul Islam said, the new refinery being built will not be effective if it is not made a universal refinery. A modern refinery can refine any crude oil in the world. Even Russian crude oil will be refined, which is being done in neighboring countries including India, South Korea, Singapore, Venezuela, America, Saudi Arabia and others.

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