Eastern Refinery Expansion Moves Ahead: Tk 31,057 Crore Project to Triple Oil Refining Capacity

Despite various technical and implementation complications, work is progressing on the modernisation and expansion project of the state-owned Eastern Refinery Limited (ERL) in Chattogram. Once the 'ERL Unit-2', being implemented at a cost of about Tk 31,057 crore, comes into operation, the country's annual fuel oil refining capacity will rise to three times its current level.

At the same time, the domestic supply of refined petroleum products will increase, import dependence will fall, and opportunities will open up to save foreign currency in the energy sector.

The government has approved about Tk 31,057 crore for the project. Of this, government financing accounts for Tk 18,566.73 crore and the Bangladesh Petroleum Corporation's (BPC) own financing for Tk 12,433.83 crore. In other words, the government will bear 60 percent of the total project cost, while the remaining 40 percent will come from BPC's own funds.

The approved project period runs from January 2025 to June 2030. However, the plan targets completing construction and finishing the project by November 2030.

The ERL expansion initiative has been taken to strengthen the country's energy security and to meet a large share of refined fuel demand through domestic production. The refinery's current annual refining capacity is 1.5 million tonnes. Once the new unit starts, that will rise to 4.5 million tonnes.

Alongside this, the capacity to meet domestic demand for petroleum products is expected to rise from the current 20 percent to about 50 percent.

The task of preparing the project's basic engineering design, or Front-End Engineering Design (FEED), document has gone to the French company Technip. The company was also involved in building Eastern Refinery's first unit in 1968.

Work is currently under way to appoint a project management consultant to control quality and supervise implementation. Preparations are also being made to appoint firms for the technical design, procurement and construction work. Under the plan, construction is targeted to begin in the middle of next year.

Because several foreign technology suppliers and licensor companies are involved in the implementation process, technical coordination has become a significant challenge. Five foreign licensor companies are attached to the project, and fresh discussions and negotiations are under way with them. After the project management consultant is appointed, a contractor will be engaged to run the engineering, procurement and construction activities.

One key goal of the modernisation project is to improve fuel quality. Eastern Refinery currently refines fuel to Euro-4 standard. Under the new project, alongside the new unit, the existing refinery is also planned to be upgraded to Euro-6 standard. The target is to bring sulfur content in fuel down to two parts per million (2 ppm), which will help reduce environmental pollution. Upgrading the existing plant may also create opportunities to benefit from carbon trading.

The new unit will also produce lube oil, sulfur, liquefied petroleum gas (LPG) and jet fuel alongside conventional fuel oil. Some of these products currently have to be imported. Once production begins at the new plant, import needs for products such as lube oil and sulfur will decrease. At the same time, LPG production as a by-product of refining and the chance to meet a large share of the country's jet fuel demand locally will be created.

According to project-related estimates, refining each barrel of crude oil could save as much as 18 to 19 dollars. Once the project is operational, the country's refining capacity will grow on the one hand, while on the other the path to greater self-reliance in the energy sector will become smoother through reduced import costs.

All in all, this project — holding its progress despite many complications — is one of the largest investments in Bangladesh's energy sector. If the work finishes on schedule, the country's energy landscape could change significantly by 2030.