Diesel import from India through an under-construction cross-border pipeline is set to begin by October, propping up drives for feeding growing fuel demand in Bangladesh.
A high-powered delegation from the state-run Bangladesh Petroleum Corporation (BPC) will visit India next week to evaluate progress in the ongoing construction works of the oil pipeline, a senior BPC official told the FE Wednesday.
Around Indian Rupees 3.46 billion is being provided under the Indian line of credit (LOC) to implement the130-kilometer-long India-Bangladesh Friendship Pipeline.
Of the oil line, 125 kilometers will be constructed inside Bangladesh and 5.0 kms on India's side.
Bangladesh currently imports around 2,200 tonnes of diesel every month from Numaligarh Refinery Ltd (NRL) to through West Bengal Railway and the BPC carries the fuel through Bangladesh Railway to Parbatipur oil depot in the country's northern region.
The BPC will, however, import as high as around 1.0 million tonnes of diesel annually through this pipeline.
Initially, the petroleum corporation will import around 250,000 tonnes of diesel per year during the initial three years of its operation.
The volume will be gradually increased to 400,000 tonnes per year during the first five years, from where the import quantity will increase to around 1.0 million tonnes a year.
Bangladesh will import diesel from India at least for 15 years under the pipeline deal.
"The country's diesel import might go beyond the already-agreed 15 years following mutual decision," said the official.
The BPC has agreed to purchase Indian diesel from NRL at a premium rate of US$5.50 per barrel to Mean of Platts Arab Gulf (MoPAG) constant for 15 years on cost-and-freight (CFR) basis.
MoPAG is the benchmark in oil-pricing formula prepared by Platts, a US-based energy information provider.
The cross-border pipeline passes through Panchagarh, Nilphamari and Dinajpur to Parbatipur oil storage.
The Indian fuel oil will be consumed by clients in Bangladesh's northern region, once the pipeline is commissioned.
Diesel demand is around 1.10 million tonnes in the country's 16 northern districts, where natural gas has yet to reach.
Bangladesh earlier imported diesel from India only for a brief period and in a small quantity of 3,500 tonnes from the state-run Bharat Petroleum Corporation Ltd (BPCL) in 2007.
The petroleum corporation (BPC) also imported around 400,000 tonnes of diesel from Indian Oil Company Ltd during 2005-06, said sources.