Condensate crisis threatens private refineries

Private condensate refineries are on the verge of closure as natural gas producers of the country are not supplying enough condensate to them to stay in business. Condensate– a gas by-product – is used as a raw material by these refineries. 

Condensate is mined together with natural gas. The refineries produce fuel products such as petrol, diesel, kerosene, and octane from the condensate.

All of the private refineries are dependent on Petrobangla for the condensate produced in the natural gas fields.

At present, gas companies have reduced their supply of condensate to private refineries as Petrobangla has increased condensate supply to state-owned refineries – especially to Rashidpur. 

Rashidpur Condensate Fractionation Plant, a state-owned company, also built a new unit with an annual capacity of 14.60 lakh barrels. 

Now the company has the capacity to refine 25.55 lakh barrels of condensate annually. 

Besides these, the state-owned Bangladesh Gas Field Company Limited, Rupantorito Prakritik Gas Company Limited and Eastern Refinery Limited also refine condensate. 

The Rashidpur Condensate Fractionation Plant, Bangladesh Gas Fields Company Ltd, Rupantarita Prakritik Gas and Eastern Refinery Ltd together can refine more than 38 lakh barrels of condensate annually.

The sector is in crisis because the refining capacity has almost doubled in the last two years but the supply of raw materials has not grown proportionately. 

Five years ago, the private sector used to get 20.94 lakh barrels of condensate annually – which has now dropped to 15 lakh barrels per year. 

At that time, the total condensate production was 30.68 lakh barrels per year. 

According to Petrobangla, over four years – until 2019 – the amount of condensate increased by 35 percent to 41.42 lakh barrels. 

"The Energy Division prioritises public plants when allotting the condensate produced at gas fields – as per its availability," said Ruhul Amin, recently retired chairman of Petrobangla. 

But this policy of Petrobangla has jeopardised the business of the private refineries. Take the case of CVO Petrochemical Refinery Limited and Petromax Refinery Limited, both set up during the fiscal year 2013-14. Both were initially successful businesses.

Petromax is a subsidiary of Shahjibazar Power Company Limited, which is a listed company on the share market; CVO Petrochemical is also a listed company. 

But these businesses soon faced competition from new entrants in the field. Three more private companies, namely Super Petrochemical Private Ltd, a concern of TK group; Rupsa Tank Terminals and Refinery Ltd and Carbon Holding Ltd, also came onto the market after 2017.  

Bashundhara has heavily invested in this business in Chattogram but is yet to begin production. 

In addition to the business competition, private companies faced punitive measures on allegations of selling unrefined fuel leading to loss of condensate allotment. 

In July 2016, the BPC sent a letter to the Jalalabad Gas Field Company not to supply condensate to the CVO Petrochemical Refinery in light of allegations of it selling unrefined oil in the open market. 

As a result, the production of the company was kept shut for the next two years.

Syed Mehdi Hasan, Director (marketing) of BPC said "We have been receiving allegations of fuel adulteration against some private refineries. However, as we are very strict about the quality of the product, we are taking action against dishonest refineries."

However, on the condition that CVO Petrochemical will not supply unrefined oil to the open market, the BPC recommended in 2018 that Petrobangla supply condensate to it. 

Mowin Hossain, company secretary of CVO Petrochemical, told The Business Standard because of the issues with condensate allocation, private refineries have recommended condensate be purchased via the BPC. 

The refineries sell their products via the Padma, Meghna and Jamuna oil companies – under the Bangladesh Petroleum Corporation.

Petromax Refinery losing business

Petromax started commercial operations in 2013. Octane is its main product, but the company also produces small quantities of diesel, petroleum and kerosene. It buys condensate from the Rupantarito Prakritik Gas Company. 

Shahjibazar Power holds a 90 percent share of Petromax Refinery with an investment of Tk90 crore.

In the fiscal year 2013-14, Petromax earned Tk362.35 crore and made a net profit of Tk20.59 crore. The following year, fiscal year 2014-15, the company earned a maximum of Tk764.26 crore and made a net profit of Tk72.88 crore. Since then, its business has declined.

In the four years leading up to fiscal year 2018-19, Petromax's business fell by 27 percent to stand at Tk560.66 crore. During the period, net profit decreased by 82 percent and was Tk13 crore. 

Yeasin Ahmed, company secretary of Shahjibazar Power, said the supply of condensate from the gas company has decreased.

"Earlier, we used to get 9.32 lakh barrels of condensate annually which has now decreased to 6.77 lakh barrels." 

He said they brought allegations against Rupantorito Prakritik Gas Company, stating that it slashed the supply of condensate to the company, but they have yet to receive a response. 

CVO Petrochemical Refinery 

Of the refineries, only CVO Petrochemical Refinery is listed on the share market. In 2014, the company shifted its business from producing edible oil to refining condensate. 

It entered into an agreement with the Jalalabad Gas Field to buy condensate. The agreement will expire on December 31, 2020. However, due to the scarcity of condensate, the company has been able to utilise only 20 percent of its production capacity. 

As a result, the net profits of the company fell by 98 percent in fiscal year 2018-19 while it had made a net profit of Tk18 crore in 2014-15.

In the fiscal year 2014-15, the company gave its shareholders a 40 percent dividend – 25 percent stock and 15 percent cash dividends. As the company lost business in fiscal year 2018-19, it gave its shareholders

just a 2 percent cash dividend. 

Mowin Hossain, company secretary of CVO Petrochemical, told The Business Standard that the competition – in the sector of fuel refined from condensate – has intensified. 

The company used to have 1.57 lakh barrels in 2017, which now has dropped to .99 lakh barrels per year.

"The refineries have made a proposal for the BPC to import condensate. Refineries will be under threat if condensate imports are not allowed," he said.