Huge Stock of Unsold HFO

Private companies agree to purchase from BPC

Shamim Jahangir

17th June, 2020 10:28:57 printer

Private companies agree to purchase from BPC

Bangladesh Petroleum Corporation (BPC) has found a solution to sell huge stock of petroleum products remaining unsold in their fuel storage depot in the country, as private power generation companies agreed to purchase fuel from the state-owned organization.

Earlier in 2011, private companies were allowed to import fuel for generating electricity in the country.

But now the private companies are considering purchasing of fuel from BPC profitable as the government has imposed 34 percent supplementary duty on fuel import by private companies in FY21.

Eastern Refinery Limited (ERL) may have to suspend production of petroleum products, if Bangladesh Petroleum Corporation (BPC) fails to sell their huge stock of fuel.

Eastern Refinery Limited (ERL) has already produced 200,000 tonnes of High-speed Fuel Oil (HFO) against its capacity of 150,000 tonnes,” a top official of BP said.

BPC has found a solution as private power generation companies have agreed to procure 5-10 percent of their total requirement from the state-owned corporation.

The annual demand for furnace oil is around 3.2 million tonnes to generate 5,700MW of electricity in the country. 

Of them, Public sector is generating about 1,200 MW of electricity and private sector is about 4,500 MW.

Against the requirement, the ERL produces only 200,000-300,000 tonnes of HFO.

The private sector interested to procure the HFO through own arrangement to generate electricity whereas the Bangladesh Power Development Board (BPDB) prefers to procure it from Bangladesh Petroleum Corporation (BPC).

But, the demand of the HFO declined as the electricity generation in state-owned oil-fired plant has come down significantly following poor demand of electricity during the worsening coronavirus situation in the country, the official said. 

As a result, BPC is facing the pressure with huge stock of unsold fuel, the official added.

In a meeting on Wednesday, ERL Managing Director Md Akterul Hoque said it’s necessary to continue production for smooth operation of the country lone refinery.

He claimed the ERL product is finest compared to the fuel imported by private companies.

Regarding finding a solution to the problem, a meeting was held. Chaired by State Minister for Power and Energy Nasrul Hamid, Prime Minister’s energy adviser Dr Tawfiq-e-Elahi Chowdhury, energy and mineral resources division’s senior secretary Md Anisur Rahman, Power Division secretary Dr. Sultan Ahmed, BPC chairman Shamsur Rahman, BPDB chairman Belayet Hossain and senior official concerned attended the virtual meeting.       

“Sulpher content in our HFO product is only 3.5 percent whereas it is 3.8 percent in the fuel imported by private companies,” said BPC chairman Shamsur Rahman.

The power generating companies may collect the HFO directly from ERL to get finest product, he said.

Power Division secretary Dr. Sultan Ahmed said the BPC can accept transportation cost fully.

Now, the BPDB and BPC are sharing fuel transport cost equally for electricity generation.

BPC chairman Shamsur Rahman accepted the proposal to overcome the stockpile of the petroleum fuels.

In the meeting, it has been decided that BPDB would procure the HFO to feed private power plants in the country.       

Oil prices in the international market witnessed steepest fall in March as global demand fell following corona pandemic.

The BPC earned profit of around Tk16 per litre in diesel and Tk5.50 per litre in petroleum products as on March 11, 2020 due to lower global oil prices, said a BPC official.

The price of brent crude, the benchmark in international oil price, now hovers at around $ 33 per barrel as on March 11, which was over $70 per barrel on January 7, 2020 in the regular market. It now stands at $41 on Wednesday.

The state-owned corporation currently imports around 5.0 million tonnes of diesel, 1.4 million tonnes of crude oil and 200,000 tonnes of furnace oil annually.

The BPC along procures around 85 percent of the country's oil requirement, with the rest by the private sector.

The current retail price of furnace oil is Tk 42 per litre, diesel, kerosene Tk 65 per litre each and octane and petrol is Tk 89 per litre and Tk86 per litre respectively.