Md Shamsur Rahman, chairman of Bangladesh Petroleum Corporation (BPC) as well as the board of directors of Padma Oil Company Ltd, Jamuna Oil Company Ltd and Eastern Lubricants Blenders Limited, Bangladesh, recently talked to The Business Standard over different issues of the country's fuel sector.
He said the private investors had nothing to be worried about the BPC's proposed Liquefied Petroleum Gas (LPG) plant in Moheskhali with a capacity of 10 million tonnes, as the market of LPG was of 40 million tonnes.
Here is an abstract of his talk.
TBS: How is the BPC maintaining the demand and supply balance of fuel?
We import both crude and refined oil. Currently, the country has a demand of 6 million tonnes of fuel annually. We can only refine around 1.4 million tonnes while the rest of the fuel are being imported as a refined product.
There is a three percent annual growth in demand due to various developmental work on roads, highways and infrastructure.
Considering this, we assess the demand and then import fuel based on the assessment.
Generally, for emergency support, we urge the suppliers to ensure 10 to 15 percent additional delivery apart from the amount mentioned in the contract.
TBS: Which fuel has more demand in the market?
The demand for diesel is much higher than that of other fuels, as the component is being used in different sectors, including transportation and irrigation.
But due to the availability of electricity, the demand for diesel has been decreasing gradually. Now, three stock engines are running on battery and diesel-based irrigation pump is being replaced by solar and power run machines.
TBS: After 2016, the oil price has decreased several times in international market, but people of Bangladesh did not see any reflection of it here. Why is that?
The BPC gained some profits after the fall of oil price in global market in 2014 and recovered its previous losses. However, from 2017-2018, the oil price started to increase again. But, the government has not rescheduled the price in the local market though we are now counting losses in some items of fuel. For example, now, we are selling diesel at Tk 5, furnace at Tk11.43 and kerosene oil at Tk7.02, incurring losses.
However, the price adjustment is a government policy, because the price of oil is related to other important things.
TBS: The LPG is getting popularity day by day and the BPC has a plan to set up a plant in Moheskhali. What about the progress of the plant?
We have got a plot in Moheskhali of Cox's Bazar, where Japan International Cooperation Agency (JICA) has been developing a seaport and other infrastructures for an economic zone.
Considering the country's LPG demand, we have decided to set-up a plant there for refining, bottling and distributing the gas. There will be a facility to refill the bottle from filling station.The project will cost $300 to $350 million. So, we are planning to set up the plant in a joint venture model. We have got a Letter of Intent (LOI) from six foreign companies, including some local ones.
Still, it is under analysis. If it comes into line, we will be able to import a bulk amount of LPG in big vessels.
TBS: If it comes into operation, will it affect the private sector?
The market size of the LPG is about 40 million tonnes and it will expand rapidly, because pipeline gas supply to residential sector is going to be phased out soon. So, 10 million tonnes from the government side is not a big deal. The private sector will not be affected.
TBS: What are the challenges the corporation faces?
In the last 40 years, we, as an organisation, kept the oil supply smooth across the country though it was the biggest challenge for us. The whole fuel energy sector relies on import. So, bringing it from abroad, then processing and distributing it across the country is a challenging task. However, fuel crisis has never hampered our transportation system.
Price fluctuation in the international market is another issue, as we are not self-sufficient in energy. Therefore, the cost of the finished product (refined oil) is very costly. So, improving refining capacity is another challenge. To meet up the challenge, we are installing the second unit of the Eastern Refinery in Chattogram, which will increase the refining capacity from 1.4 million tonnes to 3 million tonnes.
The third challenge is oil transportation. All of our imported oil lands at Chattogram. From there, we carry the oil to all parts of the country through water, rail, and highways, which is very risky and expensive.
TBS: BPC is the lone importer of oil. Why is the private sector not involved in this sector?
Maintaining the quality of the fuel is very crucial. Because, if the low-quality fuel is supplied to the consumers, the indirect effects will be very costly.
Keeping that in mind, as a government agency, we have been maintaining the quality very strictly.
So, there is no plan to open the sector to the private investors.