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The Indian Oil Corporation Ltd. (IOCL), a state-owned company of India, has offered to export around 5,000 tonnes of diesel to Bangladesh every month using waterways, doubling India's export of petroleum products to the country.
The state-run Bangladesh Petroleum Corporation (BPC) has received the IOCL's export proposal recently, a senior BPC official told the FE.
The IOCL intends to supply the fuel oil to the BPC's newly built oil depot at Mongla, which have a storage capacity of around 100,000 tonnes.
Presently, Bangladesh imports around 4,400 tonnes of diesel every month from the Numaligarh refinery of Assam, owned by another state-owned Indian oil company, the Bharat Petroleum Corporation Ltd. (BPCL).
If the IOCL initiates exporting diesel using waterways, the total volume of India's diesel export to Bangladesh would stand at around 9,400 tonnes.
The IOCL has offered to supply diesel at a premium rate of US$ 1.51 per barrel, if the petroleum product is imported on FOB (free on board) basis, meaning the BPC would have to bear the transportation costs.
The premium rate would be US$5.27 per barrel, if the petroleum product is imported on CFR basis, meaning the IOCL would have to carry the petroleum product to Mongla oil depot at its own expense.
The BPC then would have to pay the fuel import cost as per the mean of Platts Arab Gulf (MoPAG), a benchmark formula in fixing oil prices in international market.
As per fuel specifications, the IOCL's diesel would have 0.05 per cent sulfur content at the maximum.
The IOCL has planned to use lighter vessels to transport the fuel oil from its Haldia refinery of West Bengal to Mongla.
Currently, the BPC is carrying fuel oil from Chittagong oil depot to Mongla depot.
"We have not taken any decision regarding the IOCL's offer as yet," said the BPC official.
The BPC would examine the pros and cons of the IOCL's proposal before taking any decision, he added.
According to officials, the BPC has been importing diesel from the Numaligarh refinery to its Parbatipur oil depot using railways since October 2017.
Currently, the BPC has been importing the fuel oil in two consignments -- 2200 tonnes in each consignment-every month.
But the BPC can import three to four consignments of diesel every month under the agreement between the BPC and the BPCL, the officials said
The BPC pays a premium rate of US$ 5.50 per barrel on CFR basis to import Indian diesel from the Numaligarh refinery.
Indian diesel is being consumed by clients around Parbitupur localities.
To meet the domestic demand, BPC currently imports around 4.5 million tonnes of gasoil annually.
About a decade back, the BPC had imported diesel of a small quantity of 3,500 tonnes from the BPCL for a brief period in 2007.
The BPC had also imported around 400,000 tonnes of diesel from the IOCL during 2005-06.
Separately, the BPC and the BPCL are working together to build a 130-kilometre cross-country pipeline to trade diesel.
The BPCL will bear the entire costs for the construction of the pipeline and the BPC will import diesel through the pipeline at least for 15 years.
Bangladesh is eyeing to import around 1.0 million tonnes of diesel annually through this pipeline.
The premium rate for importing gasoil through this pipeline would be $ 5.50 per barrel on CFR basis.
The state-run Bangladesh Power Development Board (BPDB) will build a 150 megawatt (MW) diesel-fired power plant at Saidpur by 2020 and the diesel would be imported through the proposed 130 km cross-country pipeline. Around 150,000 tonnes of diesel would be required for the plant annually.
The demand for diesel is around 1.10 million tonnes in 16 northern districts of Bangladesh.