- Move in response to Russia's refined oil offer
- BPC formed a committee to analyse Russian proposal
- The committee is now reviewing purchase conditions
- Bangladesh earlier turned down Moscow's crude oil supply proposal
- India and China are now buying Russian crude oil at 35% discounted prices
- Local refineries do not have capacity to refine Russian crude oil
- Russian team coming to assess possibility of upgrading refineries
A Russian state-owned company has now offered to sell finished oil to Bangladesh as the South Asian country does not have capacity to refine Moscow's crude oil.
Rosneft Oil Company Russia gave the proposal last week, said a high official of the Bangladesh Petroleum Corporation (BPC), on condition of anonymity.
The price at which the company will supply oil could not be learnt immediately. But Bangladesh expects to get it at a reasonable price.
At present, China and India are procuring Russian crude oil at 35% lower than regular prices.
Currently, the BPC imports refined fuel from eight countries – Kuwait, Malaysia, the UAE, China, Indonesia, Thailand, Singapore and India.
The price of the refined oil is being determined by S&P Platts' rate, which is equal to the crude oil price rate plus $20-$24 premium per barrel.
When contacted, Nasrul Hamid, state minister for the Ministry of Power, Energy, and Mineral Resources, told The Business Standard, "We are receiving proposals from Russian state-owned companies and different countries. We need to look at how we can fulfil the conditions of these proposals.
"Earlier, we turned away the proposal of Russian crude oil as we do not have capability to refine that."
After receiving the latest proposal for refined oil procurement from the Russian company, the BPC had a meeting with the officials of Eastern Refinery Limited last week, more than one participant in the meeting told TBS.
The BPC is now scrutinising the proposal as Russia has given some conditions.
Led by Mostafa Quadrat Elahi, general manager (Commercial and Operations), a team was formed to analyse the proposal, said sources in the know.
However, Mostafa Quadrat could not be contacted over the phone.
Barriers to refining Russian crude oil
Managing Director of Eastern Refinery Md Lokman, told TBS, "We have received documents from Russia. After analysing the documents, we have reached a decision that it is not possible to refine Russian crude oil in our refinery as it has higher density than Middle Eastern crude oil."
The ERL is technically incapable of using Russian crude oil, he said.
"Furthermore, the Eastern Refinery Limited's plant is 54 years old, so it cannot be temporarily modified to refine Russian oil. The entire plant can go out of order if we modify it for Russian crude," he noted.
Asked whether it was possible to build a new refinery immediately to deal with the crisis and take advantage of the opportunity to obtain Russian oil, he said, "To build a new refinery may take five years."
However, Lokman said they may receive an oil sample from Russia to check again if it is suitable for Eastern Refinery.
He also suggested that Bangladesh add the option of refining Russian crude oil at the proposed Eastern Refinery Limited-2.
In 2010, the government decided to build the 2nd unit of the ERL to raise its refining capacity to 45 lakh tonnes annually to meet local demand.
But its proposal has been amended at least 10 times and the construction is yet to start.
"If we use Russian crude, some features will not match and we will not get the maximum output," the Eastern Refinery MD told TBS earlier.
The annual capacity of the state-owned Eastern Refinery Limited, built in 1968, is around 15 lakh tonnes, whose supplies have already been booked from Saudi Aramco and the United Ara.
Russian team coming to assess upgrading local refineries
A team of Russian experts will visit Dhaka soon to assess the possibility of upgrading the local refineries so that Russian oil can be refined here, Foreign Secretary Masud Bin Momen told a group of reporters on Tuesday.
Amid the Russian fuel's market loss following western sanctions, India is importing oil from Russia at a cheaper rate.
Bangladesh may not have any sanction-related problems in importing Russian crude oil, but it lacks the capability to refine it, he said.
"If we can develop the capacity to refine Russian crude oil, we can also import oil from there. But he admitted that it will take a long time," Masud Bin Momen added.
"A team of experts, coming to Dhaka in the next few days, will visit our refineries and work on updating the existing technical barriers.
"Since the instructions came today, we will soon sit with other ministries to complete the necessary coordination works expeditiously," he noted.