Technip likely to get contract for 2nd refinery construction

Saleh Noman . Chattogram

Stalemate in the construction of the second unit of the lone state-owned fuel oil refinery Eastern Refinery Limited seems to have overcome as the Bangladesh Petroleum Corporation (BPC) has decided to talk further with French energy technology giant Technip FMC for constructing the unit.

The BPC took an initiative in 2015 to construct the second unit of Eastern Refinery to triple the country’s crude oil processing capacity and signed a memorandum of understanding with Technip to carry out the front-end engineering design.

Currently, the Eastern Refinery is capable of refining 1.5 million tonnes of crude oil per year and the proposed unit will have the capacity to refine 3 million tonnes of crude oil per year.

The new unit will be set up on a 120-acre plot adjacent to the existing unit of Eastern Refinery at Patenga of Chattogram. Construction works of unit 2 is expected to be completed in three years after appointment of the contractor, officials at the refinery said.

The project came to a halt over indecision in appointing contractor as disagreement emerged between Technip and the project management consultant Engineers India Limited, an Indian state-run entity, over the cost of constructing the unit, said officials at BPC and Eastern Refinery.

“This is a very highly technical project. We and the consultant Engineers India Limited have some observations on the design of Technip which takes some time to be resolved,” said Lokman Chowdhury, Managing Director of Eastern Refinery.

In a move to resume activities of the project, the Eastern Refinery decided to continue talks with Technip which had also designed and installed the existing unit of the refinery back in 1968.

The refinery management in the first week of July wrote to BPC asking it to discuss with Technip on engineering issues of its proposed design. Upon approval from the energy and mineral resources ministry, timing of the talks with Technip would be finalised.

Eastern Refinery Managing Director Lokman Chowdhury told The Business Post, “We have asked the ministry through the BPC to settle the technical issues with Technip as the French farm is the possible contractor to build the new refinery unit.”

He said they also submitted the summary of previous discussion with Technip under the guideline of the project management consultant.

“The indecision is over. We have now decided to negotiate with Technip. If possible, we will finalise a technical agreement with them at the initial step and the project cost will be discussed later,” said Loakman.

Asked about the project cost, Lokman said that the technical issues would be finalised first and then the financial cost for its implementation would be asked from Technip.

Technip submitted its design for the unit 2 in 2018 after the BPC in 2017 assigned them to carry out the front-end engineering design.

In 2016, the BPC appointed Indian state-run technical service provider Engineers India Limited as the project management consultant. The consultant suggested an open tender method for selecting contractor but Technip in 2019 submitted a technical offer for appointing contractor which is still under evaluation.

Lokman said Technip initially proposed more than $2 billion for the construction of unit 2 but the consultant Engineers India Limited made a separate estimate. Based on this, estimate will now be discussed with Technip, he said, declining to disclose Engineers India Limited’s estimate.

Engineers India Limited in a media release at the time mentioned that the probable cost of constructing unit 2 might stand at $1.7 billion.

Syed Mehedi Hasan, Director for Operation and Planning at the BPC, told The Business Post that Technip had developed the technical design for the project, so the corporation decided to build the new unit with them but it was not finalised yet.

But both sides have some observations on their proposals that require further discussion, he said.

Officials at the refinery said they had decided to complete construction works of the unit 2 by 2024 and the contract term with the Engineers India Limited as consultant has been extended till 2024.

At present, one-fourth of the country’s 6.5 million tonnes of fuel demand is refined at the Eastern Refinery from imported crude oil. The rest of the demand is met through the import of refined oil. After construction of the unit 2, two-thirds of the nation’s energy demand would be met and Tk 2,000 crore could be saved.