Govt to expand Eastern Refinery with Tk 35,465cr

The government has finally approved the long-pending modernisation and expansion project of Eastern Refinery Limited (ERL), the country's only fuel oil refinery, opting to implement it with state financing after shelving an earlier joint venture plan with S Alam Group.

The Executive Committee of the National Economic Council (Ecnec) yesterday approved the project at an estimated cost of Tk 35,465 crore.

Once completed, the project will triple ERL's crude oil refining capacity, allowing the refinery to process up to 4.5 million tonnes of crude oil annually, up from the current capacity of 1.5 million tonnes.

Established in 1968 at Patenga in Chattogram, ERL currently meets only around 20 percent of the country's total demand for petroleum products. Due to limited refining capacity, Bangladesh has to import large volumes of refined fuel such as petrol, diesel and octane, which costs the country a substantial amount of foreign currency. Refining crude oil domestically is significantly more cost-effective.

Once completed, the project will triple the company's crude oil refining capacity to 4.5 million tonnes annually

Energy sector officials expect the modernisation and expansion project to save billions of dollars in foreign exchange over the long term.

Earlier, the ousted Awami League government had decided in February last year to build a second unit of ERL, previously called ERL-2, through a joint venture with S Alam Group. After assuming office, however, the interim government scrapped the joint venture plan and explored foreign investment options before eventually deciding to implement the project using government funds and ERL's own financing.

"We are not calling this project ERL-2, as the existing refinery will be modernised and expanded under the same project," said Amin Ul Ahsan, chairman of Bangladesh Petroleum Corporation (BPC), the parent body of ERL.

He said the government will finance 60 percent of the project, while ERL will bear the remaining 40 percent.

According to the Ecnec meeting proceedings, the project cost stands at Tk 35,465 crore, of which Tk 21,277 crore will come as government loans and Tk 14,187 crore from ERL's own financing. The project will be implemented between December 2025 and November 2030.

Officials said the modernised refinery will produce Euro-5 standard gasoline and diesel, significantly reducing reliance on imported finished petroleum products and conserving foreign exchange.

Although ERL has been in operation for more than five decades, it has not undergone any major expansion since its commissioning in 1968, forcing the country to depend heavily on imported refined fuel.

The approved plan includes detailed engineering, procurement, civil and mechanical construction, and installation of 20 processing units along with 18 utility and off-site units, according to the meeting proceedings.

Ancillary works such as electricity and gas connections, drainage infrastructure, and procurement of necessary IT and office equipment will also be completed under the project, the meeting proceedings read.

In yesterday's meeting, a total of 22 projects worth Tk 46,419 crore were approved. Of the amount, Tk 1,299 crore will be spent on the Ganga-Kapotaksha irrigation project's emergency maintenance, and another Tk 1,273 crore will be used for a water management project of the Surma-Kushiara rivers.