Bangladesh could significantly reduce fuel prices and save over US$500 million annually by meeting its entire domestic demand for fuel oils through local refining, energy experts have said.

They noted that refining crude oil domestically would lower the cost of imported refined fuel by $9-10 per barrel.

Currently, Bangladesh’s annual demand for fuel stands at approximately 7.2 million tonnes (around 5 crore barrels), all of which is met through imports.

The existing refineries can refine around 1.5 million tonnes of crude oil per year, meaning the country relies heavily on refined fuel imports, leading to significant financial burdens.

By building domestic refineries, the country could reduce its dependency on expensive imports, stabilise fuel prices, and ease the financial burden of importing refined oil, experts noted, adding that this move would benefit both the economy and consumers.

The construction of a refinery would also create job opportunities, improve energy security, and support the country’s industrial growth.

Experts have urged the government to consider this as a long-term solution to the nation’s energy challenges. This aligns with the broader goal of reducing national fuel expenditures and promoting self-sufficiency in the energy sector.

Energy expert Ijaz Hossain told the Daily Sun that if Bangladesh imports crude oil from Middle Eastern countries and refines it domestically, it could save a significant amount of foreign currency and create new job opportunities within the country.

While he suggested that a government-run refinery would be beneficial, he also noted that Bangladesh is gradually transitioning away from fossil fuels.

Given that there has been no investment in this area in the past, Ijaz believes it may not be ideal to invest in such a project now unless foreign loans with low-interest rates are available and foreign companies are willing to invest.

Currently, the country’s only state-owned refinery, Eastern Refinery Limited (ERL), requires $3.5 billion to establish a second unit. The interim government is seeking foreign partners to implement this project.

According to sources from the Bangladesh Petroleum Corporation (BPC) and the Ministry of Energy, discussions have already been held with the United Arab Emirates, Saudi Arabia, Russia, and Japan.

ERL’s existing capacity and future expansion

The ERL refinery was established in 1968 in Chattogram. The facility currently has the capacity to refine 1.5 million tonnes of fuel annually. It is operated by BPC, which is under the Ministry of Energy and Mineral Resources.

The new project aims to add another unit with a capacity of 3 million tonnes. The “Installation of ERL-2” project was initiated in 2012.

While the government has sourced a small amount of refined oil from five local private refinery companies, most of the required refined oil is still imported from various countries.

Energy expert Professor Dr M Shamsul Alam, speaking to the Daily Sun, criticised the government’s decision to enter into a partnership with S Alam Group for the refinery project.

He argued that the government should have built the refinery independently using its own funds, rather than sharing profits with private companies.

According to Shamsul, keeping the people’s money within the country is preferable, and there is no need to involve foreign or private entities in the project.

He emphasised that if a foreign company were involved, it would likely result in the hiring of foreign workers, leading to higher costs for Bangladesh. In contrast, a government-run refinery would not only reduce costs but also create more job opportunities for the local population and generate greater profits for the country.

Saudi Aramco expresses interest in building a refinery in Bangladesh

In a related development, Saudi Arabia’s state-owned oil giant, Aramco, has expressed interest in setting up an oil refinery in Bangladesh. Saudi Ambassador to Bangladesh, Essa Youssef Essa Al Duhailan, confirmed that Aramco, the world’s largest oil company, is willing to come to Bangladesh to build a refinery.

He made this announcement during the launch of a report titled “Enhancing Saudi-Bangladesh Economic Engagement: Trends, Key Challenges & Long-Term Growth Prospects” at the Ministry of Foreign Affairs on Sunday.

The proposed refinery would help meet Bangladesh’s growing demand for petroleum products and potentially serve the broader regional market, leading to transformative changes in the energy landscape.

Ambassador Al Duhailan also mentioned that if a maritime route is established between Chattogram and Saudi ports like Jeddah or Dammam, it could have a significant impact on both Bangladesh and the entire Bay of Bengal region.

Additionally, the refinery’s products could be exported to China, India, and other neighbouring countries, creating opportunities for regional trade.

The ambassador highlighted Aramco’s success in operating the Red Sea Gateway Terminal at the Patenga terminal and expressed interest in working at the Matarbari deep-sea port in Bangladesh.

Saudi Arabia and Bangladesh strengthen economic relations

The Saudi envoy highlighted that Saudi Arabia and Bangladesh share strong, multifaceted relations. He noted that both countries have never turned down each other’s proposals and expressed the desire for deeper political and economic engagement.

According to the ambassador, Bangladesh is an ideal investment destination, both for Saudi companies and international businesses.

Saudi Arabia’s renewable energy company, ACWA Power, is also interested in investing around $3.5 billion in Bangladesh.

The ambassador emphasised that Bangladesh is undergoing significant reform initiatives, and improving government procedures is essential to attract foreign investments.

However, the ambassador also pointed out the challenges posed by bureaucratic delays. He noted that processes often require multiple levels of approval and get stuck in government offices, which hinders progress.

He stressed that overcoming these barriers and maintaining a zero-tolerance approach to corruption are essential to attracting investment.

Report highlights future potential of Bangladesh-Saudi Arabia cooperation

The report, launched by the Ministry of Foreign Affairs, examines the potential for strengthening economic ties between Bangladesh and Saudi Arabia. It explores opportunities to enhance Bangladesh’s exports to Saudi Arabia and the potential benefits of importing petroleum products and other goods from Saudi Arabia.

The report also identifies key sectors in both countries with significant potential for mutual investment, aiming to elevate bilateral trade and investment flows.

The study also highlights challenges that may hinder the realisation of this potential, offering strategic recommendations to address these obstacles.

The report serves as a guide for policymakers, businesses, and investors in both countries, providing insights into how the Bangladesh-Saudi Arabia economic relationship can be strengthened for mutual benefit.

Foreign Affairs Adviser Md Touhid Hossain highlighted Bangladesh’s pride in the contributions of its expatriates to Saudi Arabia’s progress and the Kingdom’s vital support for Bangladesh’s energy security.

He emphasised that Bangladesh is poised to become an economic powerhouse in Asia, offering a strong investment landscape with its growing workforce and cohesive cultural fabric.

Touhid Hossain praised Saudi Arabia’s Vision 2030 under the leadership of King Salman and Crown Prince Mohammed bin Salman, noting that both nations are well-positioned to enhance each other’s development.

He urged Saudi businesses to explore emerging opportunities in Bangladesh, while encouraging local entrepreneurs to strengthen bilateral trade and investment, with a focus on dismantling barriers for smoother business engagement.