Wednesday, 10 August, 2022
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BPC’s Emergency Reserve Should Be Increased

  • Dr. SM Jahangir Alam
  • 1st August, 2022 03:58:37 PM
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At present, the country’s annual demand of fuel oil is about 6.5 million tons. Due to the corona epidemic, the import of fuel oil decreased slightly in the last two consecutive years. Meanwhile, due to the Russia-Ukraine war, the instability of the energy market also has a negative impact on oil imports. The International Energy Agency (IEA) has cut its global crude oil demand forecast for this year. The agency also warned that sanctions imposed against Russia in response to its attack on Ukraine would put further pressure on global energy supplies. In its monthly report on energy product markets, the IEA said that the international energy market is currently under severe uncertainty. Crude oil supply shortages are at risk of reaching the highest level in a decade at any time. The Paris-based firm says it is not yet clear what the future holds for the energy market because the ongoing crisis may cause continuous changes in market conditions. Russia is one of the world's largest oil exporters. The country has faced a major disaster due to international sanctions. Due to this, the price of fuel oil is increasing in the world market. The IEA says no direct sanctions have yet been imposed on Russia's energy trade. Other sanctions have prevented top oil companies, commercial firms, shipping companies and banks from doing any kind of business with the country.

The United States and Britain have announced a ban on fuel imports from the country. According to IEA, it is not yet clear how much Russia is going to face losses in fuel oil exports. However, due to extensive restrictions, the range of obstacles in the extraction of fuel oil in the country is large. On the other hand, the global supply of fuel is threatened as the top companies turn away from Russian fuel. The agency cut its forecast for global demand for crude oil by nearly 1 million barrels per day. According to the new forecast, global demand for fuel oil is expected to be 99.7 million barrels per day this year. Meanwhile, OPEC failed to meet the crude oil production target last month as well. The supply gap is widening due to continued failure. Mainly due to the war in Russia, the complications that have arisen with the supply of fuel are making the market even tighter. According to the International Energy Agency, there may be a shortage of 700,000 tons per day in the second quarter of this year in the fuel oil market because it has reduced the purchase of fuel from Russia to escape the sanctions of Western countries.

 

As a result, the country's supply could fall by 3 million barrels per day in April. According to the data, in February, OPEC PASS extracted 1 million 50 thousand barrels of fuel oil per day, which is much less than the target of the alliance. Several countries, including the United States, called on the alliance to produce additional fuel oil, but OPEC did not pay attention to it. The price of fuel oil is gradually increasing. The alliance had earlier forecast global crude oil demand to rise sharply in January. At that time, OPEC said that in the third quarter of this year, the global consumption of fuel oil will exceed 100 million barrels per day. According to OPEC data, consumption of the fuel product last year exceeded 100 million barrels per day in 2019. It should be noted that currently the annual demand of fuel oil in the world is about 4,500 million metric tons.

The current reserve capacity of Bangladesh Petroleum Corporation (BPC) is 1,308,847 tons. This capacity is less than required. Bangladesh ranks 74th in the global list of fuel oil consumption. The total amount of fuel oil consumed in the country in the financial year 2019-2020 was about 55.03 lakh MT. Furnace oil imports by private sector power plants, LNG imports by the government and the impact of the coronavirus pandemic have reduced oil consumption by around 16 per cent compared to 65.49 lakh metric tons in the previous fiscal year. Role of Bangladesh Petroleum Corporation in energy sector when Bangladesh Petroleum Corporation was established in 1976, the demand for petroleum products in the country was about 11 lakh metric tons. With a gradual increase, the estimated demand for the financial year 2020-21 stands at around 65.95 lakh metric tons annually. In the last financial year 2019-20, the total amount of fuel oil used in the country was about 55.03 lakh metric tons. 64.27 percent of fuel oil was used in transportation, 18.00 percent in agriculture, 7.65 percent in industry, 6.74 percent in electricity, 1.97 percent in household and 1.37 percent in other sectors. 73.11 percent of the fuel used is diesel, 6.62 percent furnace oil, 5.86 percent petrol, 4.78 percent octane, 1.92 percent kerosene, 6.27 percent Jet A-1 and 1.44 percent other oils.

The role of fuel oil is very important in the country's agriculture, transport, electricity, industry and other sectors and in the overall national economy. As the economy improves, fuel consumption increases as well as the importance of "silent" fuel supply. About 8 percent of the country's total energy demand is met from domestic sources and the remaining 92 percent through imports. Along with refined oil, crude oil has been regularly imported. The imported crude oil is processed at the country's only refinery Eastern Refinery Ltd. (ERL) with an annual processing capacity of about 15.00 lakh metric tons. ERL currently produces Octane, Petrol, Diesel, Kerosene, Furnace Oil, MTT, SBP, JBO, Naphtha, Bitumen and LPG. The produced LPG is being bottled and used as domestic fuel. Petrol, octane, diesel, kerosene, light MS, MTT and SBP are available from various government gas fields and private condensate fractionation plants. At present there are 11 naval based depots, 7 railhead depots, 222 barge depots, 1 gas field adjacent depot and 3 aviation depots i.e. total 24 depots with major installations for the supply of "silent" fuel oil across the country. Manpower of around 50,000 is directly engaged in the supply of Nirwa Niwabhi fuel oil across the country. About 84 percent of used fuel oil is transported by sea, 9 percent by rail and 7 percent by road. The total number of tankers (Coastal 91, Bay-Crossing Shallow Draft 71, Shallow Draft 4 and Mini Oil Tanker 15) engaged in transportation of fuel by sea is 181. Apart from the major facilities, Fatulla/Godnail, Baghabari, Daulatpur, Barisal, Chandpur, Jhalkathi, Bhairab, Ashuganj, Sachna Bazar, Mongla and Chilmari depots are river-centered. Parvatipur, Rangpur, Rajshahi/Harian, Natore, Sylhet/Moghlabazar, Srimangal and EPOL depot railhead. 2 thousand 260 filling stations are engaged in delivering fuel to the doorsteps of customers in remote areas of the country, 21,974 agents/distributors, 668 packed point dealers and 3,133 LPG dealers. At the current rate of consumption of fuel oil, it is possible to keep imported oil reserves equivalent to about 40/45 days of demand in the country. In 2009, the fuel oil storage capacity in the country was about 9 lakh metric tons and the annual demand was about 33 lakh metric tons. At present the reserve capacity is 13.03 lakh metric tons and the demand for petroleum products for the financial year 2020-21 is estimated to be around 65.95 lakh metric tons. BPC continues to increase storage capacity in order to build safe reserves of fuel oil. Moreover, under diversification of sources, India-Bangladesh friendship pipeline construction project is underway to import oil from India's Numaligarh refinery. Chittagong-Dhaka Pipeline Project is said to be in progress for transportation of fuel through pipelines. The demand of energy in the country is increasing gradually. In this situation, the retention capacity of BPC is insufficient. So its holding capacity should be increased. Emergency reserves should also be increased.

The writer is a Bir Muktijoddha, Former Tax Commissioner and Director - Bangladesh Satellite Co. Ltd.

Source: Sun Editorial