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Eastern Refinery Ltd (ERL), the lone crude oil refinery of the country, has remained shut over the past one week due to storage bottlenecks and dented the demand out of the coronavirus pandemic.
Despite repeated attempts, ERL, a wholly-owned subsidiary of state-run Bangladesh Petroleum Corporation, or BPC, could not arrange sufficient storage facility to keep the refinery operational, a senior BPC official told the FE on Friday.
The BPC had to cancel one 100,000 tonne Murban crude oil term cargo from Abu Dhabi National Oil Company, or ADNOC, this month as the consequence, he said.
The ERL was last shut on regular overhauling for 35 days starting from November 16, 2019.
It shuts operations once in every two years for overhauling and maintenance.
Currently, the country's oil storage capacity is saturated due to muted domestic demand as a result of the ongoing coronavirus pandemic and subsequent limited scale of business and commercial operations.
Consumption of furnace oil has reached the lowest level due to limited operations of state-owned furnace oil-fired power plants.
Operations of the ERL is now shut mainly due to inadequate furnace oil storage facility, said the official.
All other refined petroleum products, which are the output of the ERL like diesel, jet fuel, petrol, octane and super kerosene have consumption though at reduced level due to the ongoing coronavirus pandemic.
ERL is the sole supplier of furnace oil to the furnace oil-fired power plants owned the government.
ERL has around 150,000 tonne furnace oil storage capacity across the country.
Bangladesh has around 5700 megawatt or MW capacity furnace-oil fired power plants, of which 4500 MW capacity are owned by the private sector, while the remaining 1200 MW capacity is owned by the public sector.
The Bangladesh private sector typically imports around 3.0 million tonnes of furnace oil independently to run their power plants.
The government pay 9.0 per cent service charge to the private sector as incentives to import furnace oil and run the power plants.
Private sector has storage capacities separately to carry out furnace oil imports regularly to run their power plants.
To that end, BPC had sought support from the private sector to facilitate storage of furnace oil.
During a recent meeting, the private sector, however, agreed to purchase 5-10 per cent of their furnace oil requirement from the ERL to help latter resumption of operations.
But the private sector is yet to take ERL's fuel, said a senior ERL official.
The official could not say when the ERL will resume operation but said it will get back businesses immediate after having sufficient storage to keep its fuel.
Against the backdrop of lower domestic demand, BPC has had to grapple with limited storage capacity of oil products, prompting it defer nine cargoes in April and May, BPC's director for operations and planning Syed Mehdi Hasan said.
The BPC typically imports 1.40 million mt of crude oil for refinery in the ERL.
Saudi Arabian Oil Company, or Saudi Aramco, and ADNOC supply the Arabian light crude and Murban crude oil respectively on term deal to the ERL round the year with at least one cargo in every alternative month each.
International Islamic Trade Finance Corporation, or ITFC, an autonomous entity within the Islamic Development Bank Group, lent US$800 million to BPC to import crude oil in 2020, said the BPC official.
The installed capacity of the ERL, established in 1968, is 1.5 million tonnes per year.
But currently it has been refining crude oil at de-rated capacity.
ERL produces refined petroleum products from crude oil and sells it in Bangladesh's local market through BPC's subsidiary marketing and distribution companies.