Bangladesh Petroleum Corporation (BPC) increased the import of furnace oil after Bangladesh Power Development Board (BPDB) raised the demand for the fuel to be used at power plants. However, BPDB is now taking fuel less than the demand they placed, thus, BPC fears facing fines over unloading the fuel from ships.
The BPC also sent letters to the BPDB repeatedly, but the latter is not responding much. The BPC last sent a letter to the Energy and Mineral Resources Division on 22 April stating that delays in unloading fuel from ships could cause financial losses.
The letter also requested the Energy and Mineral Resources Division to instruct BPDB to receive 40,000 tonnes of furnace oil within the remaining days of April and 100,000 tonnes in May to avoid the financial losses.
According to BPC sources, import of fuel requires prior agreements with foreign suppliers. If power plants do not receive the oil, it becomes difficult to import as per contracts, and suppliers can take legal actions.
The PDB on 11 September 2023 sent a letter to BPC stating a demand of 1,239,231 tonnes of furnace oil for 2025. The PDB increased the demand by three times higher to 3,551,048 tonnes last March.
The BPC’s letter also presented a comparative picture of BPDB’s oil demand and actual reception.
In January, BPDB demanded 65,577 tonnes but received only 18,434 tonnes. In February, they demanded 65,260 tonnes and took 46,280 tonnes. Based on the rising demand, BPDB was expected to take 507,292 tonnes per month from March onward, but they received only 69,212 tonnes in March.
Following a letter from BPC, the Energy and Mineral Resources Division sent a letter to the Power Division on 19 April to receive the furnace oil urgently.
A copy of the letter was also sent to BPDB. The letter said that BPC imports 75,000 to 100,000 tonnes of furnace oil per month for power plants, and BPC faces a shortage of places for storage because of BPDB’s irregular intake. If ships are delayed, BPC will have to incur financial damage.
Eastern Refinery Limited (ERL) also supplies 1,100 tonnes of furnace oil per day, but BPC’s suppliers might not be able to take it either, and that might halt ERL’s production. The letter sought instructions to the BPDB to receive at least 25,000 tonnes of oil by 20 April.
Speaking about this, BPDB Chairman Md Rezaul Karim told Prothom Alo that private power plants sometimes places additional demand. Besides, demand for electricity also fluctuates. Less operation of oil-run plants also reduces costs. So, furnace oil is bought considering many such factors. That is why fuel is not always taken as per the projected demand.
He further said arrangements have been made to unload oil from BPC’s ships after their letter. The demand plan might have a fault too. A new demand would be placed to BPC soon after scrutinising again.
Following the letter of the Power Division, BPDB took only 5,000 tonnes of furnaces oil on 19 April and 20 April, and as of 21 April, BPDB received 35,428 tonnes this month, according to BPC sources.
The BPC letter said a ship with 25,000 tonnes of furnace oil is likely to arrive between 26 April and 28 April. Another ship carrying the same amount might arrive between 5 May and 7 May, followed by ships on 17–19 May and 28–30 May. So, BPDB should receive the fuel as soon as possible, or else the agency will have to pay compensation due to delays.
In another letter on April 8, BPC said that most power plants import the majority of their furnace oil independently, but they rely on BPC when global fuel prices rise or complications over opening of LCs (letters of credit) arise. Power companies met only 12 per cent of total demand from BPC in the 2021–22 fiscal, 22 per cent in the 2022–23 fiscal and 44 per cent in the 2023–24 fiscal. Yet, BPDB received less oil than their demand in all three years.
BPC officials said PDB started receiving more furnace oil from BPC after the dollar crisis began in 2022. Besides, power plants received a 9 per cent service charge when they imported oil themselves, but the government recently reduced service charge to 5 per cent. As a result, private power plants told the BPDB they would no longer import oil on their own. After that, BPDB increased their demand.
BPC Chairman Md. Amin Ul Ahsan told Prothom Alo they are making arrangements to supply oil as per the BPDB’s demand prioritising power production. Since there is limited storage capacity, complications arise over failure to receive oil as per demand. BPDB said they would quickly arrange for oil unloading.
If that happens, financial damage can be avoided, he added.