Eastern Refinery running on fumes

With usable crude stocks nearly exhausted amid import disruptions due to US-Israel war on Iran, the Eastern Refinery Ltd (ERL) has been kept running by drawing from “deadstock”, residual crude settled at the bottom of storage tanks that can only be used in limited quantities in emergencies.

Production at the refinery, the lone state-owned oil refinery, has dropped sharply, raising concerns of a possible shutdown within a week unless fresh supplies arrive.

Bangladesh needs to import around 1,20,000 tonnes of crude oil monthly. Due to the ongoing conflict in the Middle East, no crude oil shipments arrived in February and March. Officials said there is little likelihood of any shipment arriving in April as well.

Located in Patenga of Chattogram, ERL operates under Bangladesh Petroleum Corporation (BPC) and primarily processes Saudi Arabia’s Arabian Light and the UAE’s Murban crude to produce 12 types of products including diesel, petrol and jet fuel.

However, with scheduled shipments from these sources being delayed, a supply bottleneck has been created, forcing a gradual scale-down in ERL’s operations.

According to BPC data, ERL has a storage capacity of around 2,25,000 tonnes.

In an effort to sustain output, authorities have also tapped crude from Single Point Mooring (SPM) facilities, a fast, safe and low-cost way system to transfer large volumes of fuel directly from ships through pipelines. However, it is still not fully operational due to operational complexities, including operator selection.

In mid-2024, a limited amount of oil was kept there on a trial basis, which is now being used amid supply shortages.

“The refinery has not yet ceased operations entirely, but output has been reduced significantly. We still have around 25,000 tonnes of stock, which can support operations for more than a week,” said BPC General Manager Muhammad Morshed Hossain Azad.

He added that three out of ERL’s five processing units remain operational, and have collectively added around 100-120 tonnes of petrol and diesel daily to BPC’s storage tanks over the past two days.

Seeking to reassure markets, Morshed said two vessels carrying 60,000 tonnes of diesel were expected to berth at the jetty last night, while another two shipments of similar volume are scheduled to arrive on April 18.

“There is no reason to panic over supply pressure,” he added.

According to BPC import data, about 95 percent of Bangladesh’s annual fuel demand of around 7 million tonnes is import-dependent. About 5-5.2 million tonnes are brought in as refined fuels such as diesel, furnace oil, octane, and jet fuel, while only about 1.5 million tonnes are imported as crude for refining at ERL.

Officials said ERL typically processes around 4,500 tonnes of crude daily, but output has been scaled down amid the ongoing shortage. At one point, usable stocks fell below 2,000 tonnes, forcing authorities to limit operations.

Monir Hossain Chowdhury, joint secretary and spokesperson of the energy ministry, said, “Refined fuel from ERL has continued to be added to the system over the past two days, albeit at reduced capacity.”

“Efforts are underway to keep the refinery operational by combining limited production with the use of deadstock which were stocked in ERL and SPM,” he also said.

He also confirmed that Bangladesh is expected to receive a 1,00,000-tonne crude shipment on May 2, which will pass through the Strait of Hormuz on April 22.

“Most of our fuel demand is met through imported refined products. So even if crude stocks remain low, it is unlikely to create an immediate supply crisis,” he added.