Declining crude reserve leading Eastern Refinery near operational halt

Eastern Refinery, the country’s only state-owned oil refinery, might face a halt in its operations due to a declining crude oil reserve.

Till 30 March, The Eastern Refinery Limited (ERL) held around 30,500 tonnes of usable crude- enough to sustain operations for around six days, officials said.

Asking for anonymity, a senior ERL official said, “With the current stock, operations can continue until 6 April (with throughput at the installed capacity of 4,500 tonnes per day). After that, adjustments may be required depending on shipment arrivals.”

To increase reserves, the supply of crude for processing has already been reduced to about 3,700 tonnes per day, down from the installed capacity. Officials have not yet said how long the reserves might last at the reduced rate.

While the ERL has operated with relative stability since 1968, undergoing periodic “turnarounds” every three to five years, a shutdown triggered by depleted crude stocks would be highly unusual.

The current strain follows delays in two crude shipments totalling 200,000 tonnes from Saudi Arabia and the UAE, originally scheduled for March.

Bangladesh typically imports two crude cargoes a month. However, since the escalation of the US-Israel war on Iran, three shipments have been delayed.

Officials said one cargo has since been loaded and is now in transit through the Strait of Hormuz. Iran’s envoy in Bangladesh yesterday indicated that necessary measures would be taken to ensure safe passage of commercial vessels, including those carrying fuel for Bangladesh.

Although shipping through Hormuz remains constrained, limited transit has resumed under controlled conditions.

Even so, the next crude cargo is unlikely to reach the Chattogram port before mid-April, leaving a short gap in the ERL’s supply schedule, according to Bangladesh Petroleum Corporation (BPC) officials.

The ERL processes around 1.5 million tonnes of crude annually -- roughly 125,000 tonnes a month -- producing petrol, naphtha, furnace oil, and a portion of diesel.

Most of the country’s petrol demand is met from locally produced condensate, processed at a government-owned facility and three private refineries.

These facilities also produce octane by blending naphtha with petrol, meaning around half of the country’s octane supply is also locally produced.

However, a halt in the ERL’s operations could disrupt naphtha availability, affecting the blending process for petrol and octane.

However, local condensate production remains steady, according to Petrobangla data.

On the other hand, most of the country’s diesel demand is met through imports.

Officials said a temporary operational stoppage at the ERL is unlikely to significantly disrupt supply in April, as additional shipments are already in the pipeline.

A diesel shipment worth 27,000 tonnes has arrived Chattogram port from Malayasia yesterday while another 30,000 tonnes is expected by April 7. Two more of similar volume due in mid-April.

To address potential octane pressure, a 25,000-tonne shipment is expected by 7 April, followed by another in mid-April.

According to BPC data, these volumes would be sufficient to meet demand for the next two months, reducing the likelihood of any immediate shortage.

Meanwhile, domestic condensate processing is also continuing, providing a partial buffer.

The situation highlights Bangladesh’s dependence on the Strait of Hormuz, a key global oil transit route.

Industry insiders say the ERL is configured to process specific Middle Eastern light crude, limiting flexibility in sourcing alternatives quickly. However, officials stress that the current challenge reflects delays and disruptions rather than a complete supply cutoff.

Pressure on petrol and octane supplies has tightened in recent days, though officials expect some easing.

As of yesterday, BPC data showed octane stocks at 9,407 tonnes and petrol stocks at 12,810 tonnes -- enough for about eight to nine days of demand, based on March 2025 averages.

Diesel stocks stood at 127,810 tonnes, providing a buffer of around 10 days. Furnace oil and jet fuel stocks are sufficient for the entire month of April, according to BPC.

Despite stable fuel prices for April, long queues were observed at several filling stations in Dhaka even yesterday.

Motorists reported waiting for hours to refuel, with some returning multiple times. At the Trust Filling Station in Mohakhali, queues stretched onto the street from early morning. At one point, the queue for private cars extended up to the railgate.

Before fuel tankers arrived from depots, many pumps experienced significant congestion.

Officials said the queues reflect distribution tightness and precautionary buying rather than a breakdown in overall supply.

BPC officials maintain that there are no technical barriers to restarting ERL operations once crude arrives.

“We have concern about the issue of shutting down the ERL. But we have alternative measures. We urge people not to panic, as we have already secured supplies for April,” said Monir Hossain Chowdhury, spokesperson for the Energy Division.

Data from Sylhet Gas Fields Limited shows that local production continues to supply around 720 barrels of octane and 3,318 barrels of petrol daily.

While three private refineries are processing this condensate, they lack the high-octane blending components produced by the ERL’s catalytic reforming unit.

Without the refinery’s higher-grade output in case the Middle East tensions continue, the market may face both volume and quality constraints. Local production provides a buffer, but it lacks the capacity to replace the refinery’s 1.5 million-tonne annual output.

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Industry insiders say the situation underscores the risks of relying on a single, ageing refinery.

In this regard, Monir Hossain Chowdhury said the ERL is unable to process anything other than Arabian Light Crude and the Murban, which is mainly sourced from Saudi Arabia and UAE.

“As a result, we don’t have any alternative crude sources, but we are exploring refined oil alternatives.”

The long-delayed ERL Unit-2 project has left the country exposed to external shocks, particularly those linked to geopolitical tensions in key supply routes.

Although operations can resume quickly once crude arrives, rising freight costs and insurance premiums amid Middle East tensions are already adding pressure on the national exchequer.

As the timeline for the ERL’s potential operational adjustments approaches next week, the situation remains manageable but dependent on the timely arrival of shipments.

Source: The Daily Star