Govt misses out on refining oil cheaply
Bangladesh is missing out on refining imported crude oil cheaply and saving valuable foreign currencies as it uses a plant that is more than half a century old and has failed to set up a new unit in a decade. The economic life of the first plant of state-run Eastern Refinery Ltd (ERL), a subsidiary of Bangladesh Petroleum Corporation (BPC), was estimated at 20-25 years when it was commissioned in 1968. Today, the only unit refines about 1.2 million tonnes of crude oil annually, which is less than a fifth of the total demand of 6.5 million tonnes for finished petroleum products. The rest of the finished products are imported directly. ERL, which has an annual capacity to refine 1.5 million tonnes of crude oil, is the only company that makes finished petroleum products locally. The processing cost of the 53-year-old plant has risen 89 per cent in the last decade, according to the annual report of the company for 2018-19. The cost was Tk 630 per tonne in 2009 and it surged to Tk 1,190 per tonne in 2019. ERL spent Tk 801.60 million to refine 1.271 million tonnes of crude oil in the fiscal year of 2009-10. The cost of refining 116.60 million tonnes was Tk 1388.5 million in FY2018-19. The expenditure rose mainly because of repairing and replacing equipment of the plant, said an ERL official. ERL carries out regular repairs and maintenance to keep the plant up and running. As the economic life of the plant is over, the maintenance cost has risen. There is also a drop in the quality of oil refined, and the current unit is not environment-friendly, said the official, preferring not to be named. Eastern Refinery took the initiative to launch a second plant to refine 3.0 million tonnes crude oil in 2010. But the project has seen little progress. It has revised the development of the project proposal (DPP) of the new plant 11 times. The initial cost of the project has already increased to around Tk 200 billion from Tk 130 billion. The cost may increase further as the project is still in the process of being revised. According to industry people, the new plant would have saved the country $18 to $22 per tonne. This means, had the new plant been commissioned, Bangladesh could have saved $6.6 million annually. “It should never take 11 years to prepare a DPP even if the project is too big,” said M Shamsul Alam, energy adviser of the Consumers Association of Bangladesh. He alleged that officials of ERL and BPC were procrastinating in building the new plant as it was easy to embezzle money on repairing and maintaining an expired one. “The reliance on the 53-year-old plant proves how far the energy sector is lagging behind. No country is dependent on a single plant to refine oil considering the high risk involved in the sector,” Prof Alam said. If there were two or three plants, the country would have saved a lot of foreign currency, and the cost of energy would have been lower, he added. Eastern Refinery produces 15 types of petroleum products, including gas oil (diesel), jet fuel, motor gasoline, furnace oil, and marine fuel. WHAT OFFICIALS SAY Md Lokman, managing director of ERL, defended the old plant, saying it was still useful. “We replace important equipment regularly to avoid risk. Even though the plant is 53 years old, it is still working well.” The second plant has been delayed due to uncertainties over funding and the screening of various aspects of the project, according to Lokman. “It is in the final stage of approval. If implemented, it would be possible to refine two-thirds of the fuel consumed,” he added. Md Anisur Rahman, senior secretary of the energy and mineral resources division, attributed the delay to the numerous queries raised by the consultancy firm. “There were more than 500 queries on various issues from the consultancy company. It took time to respond to these questions,” he said. In April 2016, ERL appointed Engineers India Ltd as a consultant to install the second unit. In 2017, the government signed a deal with French company Technip to prepare the engineering design of the plant. The company also built the first plant five decades ago. The project is scheduled to be presented at a regular meeting of the Executive Committee of the National Economic Council this month, said BPC Chairman Abu Bakar Siddique earlier. “Once approved, the work on the project can start quickly.” The new plant will have 10 processing units where liquefied petroleum gas, gasoline, diesel, petrol, kerosene, bitumen, jet fuel, and sulfur will be produced.
India’s mineral production up 37% in April
India’s mineral production rose by 37.1 per cent in April 2021 over the same month a year ago, according to the mines ministry. The index of mineral production of mining and quarrying sector for the month stood at 108.0, which was 37.1 per cent higher from the the level in April 2020, the ministry said in a statement. The production level of important minerals in April 2021 includes, coal 516 lakh tonnes, lignite 31 lakh tonnes, natural gas (utilised) 2,583 million cubic metre, petroleum (crude) 25 lakh tonnes, bauxite 16.61 lakh tonnes, chromite 6.36 lakh tonnes and gold 120 kg. The production of most of the important minerals showing positive growth during April 2021 over the same month a year ago includes, coal, lignite, natural gas (utilised), bauxite, chromite, copper concentrate, gold, iron ore, lead concentrate, manganese ore, zinc concentrate, limestone and phosphorite. The production of petroleum (crude) indicated a negative growth, it said. “For the period under review, it is, however, noted that due to full lockdown in April 2020, the comparison is not indicative,” the mines ministry said.
Draft cabinet note floated for 100% FDI in oil PSUs approved for disinvestment: Sources
The commerce and industry ministry has floated a draft cabinet note seeking inter-ministerial views on a proposal to allow up to 100 per cent foreign investment under automatic route in oil and gas PSUs, which have an ‘in-principle’ approval for disinvestment, sources said. The move, if approved by the union cabinet, would facilitate privatisation of India’s second biggest oil refiner Bharat Petroleum Corp Ltd (BPCL). The government is privatising BPCL and is selling its entire 52.98 per cent stake in the company. Sources said that as per the draft note, a new clause would be added in the FDI policy under the petroleum and natural gas sector. According to the proposal, foreign investment up to 100 per cent under the automatic route would be allowed in cases where an ‘in-principle’ approval for disinvestment of a PSU has been granted by the government. For BPCL privatisation, mining-to-oil conglomerate Vedanta had put in an expression of interest (EoI) for buying the government’s 52.98 per cent stake in the PSU. The other two bidders are said to be global funds, one of them being Apollo Global Management. After collating the views, the commerce and industry ministry would seek approval of the union cabinet on the proposal. At present, only 49 per cent FDI is permitted through automatic route in petroleum refining by the public sector undertakings (PSU), without any disinvestment or dilution of domestic equity in the existing PSUs.
A possible Saudi Aramco appointment on Reliance board triggers buzz over $15 billion deal
Saudi Aramco chairman and Governor of the Kingdom’s wealth fund Public Investment Fund, Yasir Al-Rumayyan, may be inducted on the board of Reliance Industries Ltd, a precursor to a $15 billion deal, reports said. An announcement of Al-Rumayyan’s induction on the RIL board or the board of the newly carved oil-to-chemical (O2C) unit may come as early as at the company’s annual shareholder meeting on June 24. “RIL’s Annual General Meeting (AGM) has historically been a keenly watched event (previously attended by 3,000 shareholders when held in physical format and last year saw 300,000 concurrent viewers of the virtual AGM across 42 countries and 468 cities) given that it has been one of the top 3 companies by market capitalisation in India, has a large free float and a large public shareholding (more than 3 million non institutional shareholders),” brokerage HSBC Global Research said in a report. And expectations are already built up for the AGM. “Over the last year, new investors have joined RIL’s digital and retail business at subsidiary level and RIL has formed new partnerships with global players like Google, Facebook, Microsoft, Qualcomm etc. Investors now expect RIL to give direction to these businesses and announce groundbreaking products,” it said, adding reports suggest that it will likely announce a new smartphone partnered with Google and its pricing. “There is also expectation of some update on Saudi Aramco deal and speculation that the Chairman of Saudi Aramco may join RIL’s board,” it said. Both RIL and Saudi Aramco did not reply to emails sent for comments. An email sent to PIF too remained unanswered. PIF has already picked up a minority stake in Reliance Retail and Jio. Billionaire Mukesh Ambani had in August 2019 announced talks for the sale of a 20 per cent stake in the oil-to-chemicals (O2C) business, which comprises its twin oil refineries at Jamnagar in Gujarat and petrochemical assets, to the world’s largest oil exporter. The deal was to conclude by March 2020 but has been delayed for reasons not disclosed by either company. Talks have revived this year and the two are reportedly discussing a cash and share deal – Aramco paying for the stake with its shares initially and then staggered cash payments over several years. In a separate report, BofA Securities said RIL’s AGM each year has turned into a key event where chairman Mukesh Ambani provides more information on the outlook of key business divisions. “Historically we have seen major announcements on phones, tariffs, stake-sales etc,” it said. The deal to sell stake in O2C business to Aramco too was announced at RIL AGM in 2019. “We expect an update on Jio-Google phone features (like 5G), potentially pricing and timeline,” it said. “Clarity on JioMart/other online commerce businesses along with the JioMart-WhatsApp integration” is also expected. Reports suggest “RIL may announce the appointment of Mr. Yasir Al-Rumayyan, chairman of Saudi Aramco and governor of the kingdom’s wealth fund Public Investment Fund, on its board during AGM,” it said. “RIL may introduce a new affordable laptop to tap into the massive demand for work from home machines.” Besides refineries and petrochemical plants, the O2C business also comprises a 51 per cent stake in the fuel retailing business. It, however, does not include the upstream oil and gas producing assets such as the flagging KG-D6 block in the Bay of Bengal. RIL had in 2019 put USD 75 billion as the value of O2C business after signing a non-binding letter of intent with Saudi Aramco. The firm had recently announced carving out the O2C business as a separate subsidiary to support strategic partnerships and new investors in order to accelerate its new energy and material plans. Digital business is already held by a subsidiary Jio Platforms and Reliance Retail holds the offline and online retail business. Aramco buying 20 per cent in O2C business would allow Reliance to build financial muscle as it carves out space for itself in highly competitive omnichannel retail. With a stake, Aramco would not only have a stake in one of the world’s best refineries and largest integrated petrochemical complex. It has access to one of the fastest-growing markets, a ready-made market for 5 lakh barrels per day of its Arabian crude and offering a potentially bigger downstream role in future. RIL refineries are one of the most complex in the world, allowing it to earn a significant premium to the benchmark Singapore gross refining margin. Its petrochemical complexes rank among the biggest in the world, whose dependency on outside raw materials is minimal. It has leadership positions both in the domestic polymer and polyester markets.