In a bid to continue the country’s development, the Government of Bangladesh is partnering with S Alam Group to build an oil refinery in Chattogram.
Under the partnership, the state-owned Eastern Refinery (ERL) will team up with the Chattogram-based conglomerate to build its long-planned second unit.
The development comes after S Alam Group in October last year sent in a proposal to the Prime Minister's Office to build the refinery on an 80-20 equity basis on the land owned by ERL in Chattogram.
On 5 February this year, the energy division wrote to the Bangladesh Petroleum Corporation (BPC), the parent company of ERL, informing it about the potential joint venture with the S Alam Group.
"It's still at a very primary stage," BPC Chairman ABM Azad said.
"We have submitted the proposal and the roadmap to set up the refinery. The government has agreed as well and constituted a committee," he added.
ERL Managing Director Md Lokman said, "We sent our final proposal to the energy division long ago for it to place before the Ecnec."
About $4 billion (over Tk 40,000 crore) of investment will be needed to build the refinery, said Subrata Kumar Bhowmick, an executive director of S Alam Group.
Meanwhile, a seven-member negotiation committee, headed by BPC Director (Operations) Md Khalid Ahmed, was formed on 14 February and was given a month to complete the negotiation.
The committee also includes three BPC officials, three ERL officials and the managing director of Padma Oil.
According to the ministry, negotiations will be completed after completing the technical and financial analysis, the modality of the joint venture, the management strategy and the equity portion.
At present, Bangladesh has a demand for around 70 lakh tonnes of petroleum products; of this, 80% are imported in refined forms owing to inadequate refining facilities.
Bangladesh has to pay huge amounts of foreign currency to import petroleum products.
Previous attempts to expand the country's oil refining capacity fell through because of a lack of financing.
ERL's bid to build the second unit in keeping with the growing demand for petroleum products as a result of stable economic growth was conceived in 2012.
The second unit was supposed to have the capacity to refine 30 lakh tonnes of oil, according to the initial proposal by the ERL; the estimated cost for the project was Tk 13,000 crore then.
However, the project has been in limbo since then due to funding issues.
The government had tried to secure foreign loans for the project but its attempts did not succeed.
It prompted the government to decide to build the refinery on its own, with 70% of the project cost coming from the ministry in the form of loans to the BPC.
The rest of the amount will come from BPC.
Following the subsequent revisions, the cost went up to Tk23,736 crore last year.
According to the latest development project proposal, the finance division had agreed to spend Tk16,142 crore and the BPC agreed to spend Tk7,100 crore.
It was yet to be decided how the rest of Tk493 crore would be mobilised.
S Alam Group said the refinery will have the capacity to refine up to 50 lakh tonnes of oil.
Although ERL's original plan has not been abandoned yet, sources said the government is considering S Alam Group's proposal of implementing the project under the joint venture.
It comes on the heels of its decision in November last year to open the fuel oil market to the private sector.
Another Bangladeshi conglomerate, Bashundhara Group has expressed interest in becoming the first private refinery owner.