Defaulting companies and their directors can now invest in private oil refineries, according to a gazette notification on the government's new energy policy.
The gazette, published on 15 November by the Energy and Mineral Resources Division, also allows such firms and their directors to engage in this business even if loan default cases against them are pending in a national or international court.
In a major policy shift, the government in August decided to allow the private sector to import and refine crude oils, and market their products through their own networks. The Ministry of Power, Energy, and Mineral Resources finalised the draft policy.
The draft policy, regarding the eligibility of private entrepreneurs, stated that "private entrepreneurial organisations or their directors must not have any outstanding loans from any type of bank or financial institution, and no case related to these loans should be pending in any national or international court".
The final policy relaxed the eligibility criteria for private entrepreneurs.
An Energy Division official, who requested not to be named, explained that the draft policy underwent multiple reviews and revisions during high-level inter-ministerial meetings. Following extensive deliberations, the decision was made to eliminate the clause barring defaulting companies and their directors from participating in the fuel oil sector.
The final policy allows defaulting entities to establish refineries and engage in various activities related to crude oil, including import, storage, processing, transportation, and marketing, the official added.
The final policy also relaxed some other criteria for private refineries. The minimum capacity requirement for fuel oil refineries has been set at 15 lakh tonnes per annum.
One significant change made in the final policy is the reduction of the required practical experience from 10 years to 5 years for consortiums involved in the construction, management, or both, of projects in the energy sector.
This relaxation is expected to encourage more companies to collaborate and participate in the fuel oil industry, potentially leading to increased investment and innovation in the sector.
The draft policy stipulated that the annual turnover of any three of the last five years of the private entrepreneurial organisation should be at least Tk5,000 crore or its equivalent in US dollars. The final policy says this condition will now apply to the overall turnover of the consortium in the case of those who wish to participate in this business by forming a joint partnership or consortium.
That is, if two or more companies have an aggregate annual turnover of at least Tk5,000 crore or its equivalent in US dollars, they can collectively participate in this business through joint ventures or consortium arrangements.
The draft policy treated the provision of jetty facilities for private-level refineries as an option, but the gazetted policy mandates the construction of jetties. Additionally, the draft policy stipulated a minimum land requirement of 80 acres and storage facilities with a minimum capacity of 2 lakh tonnes for establishing private-level refineries.
In the final policy, the conditions imposed on the minimum land and storage requirements for private-level refineries have been relaxed. Instead of mandating specific figures, the gazetted policy emphasises the need for "ideal" land availability and "sufficient and necessary" storage facilities, recognising that these requirements may vary depending on the specific refinery design and operational needs.
The final policy, however, introduced a new mandatory condition: the establishment of modern crude oil refinery effluent treatment plants (CRETPs) in every refinery.
Other features in the policy
The policy states that private refineries will have to sell a minimum of 60% of the total fuel oil outputs – diesel, octane, petrol, jet fuel, furnace oil and by-products – to the BPC at a government-determined price during the initial three years from the commencement.
The remaining 40% of the fuel oil can be sold by the refineries through their marketing network. If a private refinery faces difficulties selling 40% of its oil due to an insufficient sales network, it has the option to sell any surplus amount to the BPC.
In the subsequent two years, private refineries are permitted to sell up to 50% of their produced oil through their management. The proportion will be reviewed after the initial five years of the private sector's engagement in the coveted fuel oil business.
They will also be allowed to establish petrol pumps on roads and highways, upazilas, and metropolitan areas to retail their produced fuel oil. The government-set retail prices will be maintained at these designated petrol pumps.
Since the country's independence, the government has historically been responsible for fuel oil supply management. The state-owned BPC has been the sole player in this field.
Nevertheless, a confidential source within the division, who wished to remain anonymous, revealed to TBS that several prominent private sector entities, including Bashundhara Group, Partex Group, TK Group, and Elite Group, have applied to the ministry for approval to establish refineries dedicated to importing and refining crude fuel oil.
"We are very serious about the project. We've acquired 200 acres of land in Sitakundu in Chattogram to set up our oil refinery, which will be the largest in the country," said a senior official of Bashundhara Group.
The BPC operates as the exclusive oil refining company in Bangladesh, importing crude oil and refining it at the Eastern Refinery, which was established in 1968. This refinery has an annual refining capacity of 15 lakh tonnes, catering to approximately 20% of the nation's overall demand. The remaining 80% of the fuel oil requirement is fulfilled through imports of refined oil.
To bolster its capabilities, the BPC has undertaken a project to establish the second unit of the Eastern Refinery. The project involves an estimated cost of Tk23,000 crore and is anticipated to conclude in 2027. Once completed, this project will raise the BPC's crude oil refining capacity by an additional 30 lakh tonnes.