CVO Petrochemical set to resume fuel production after series of disruptions

CVO Petrochemical Refinery Ltd (CVOPRL) is set to resume production of petrol, diesel, kerosene and other minor petrochemicals at its Chattogram plant as the government has now allowed imports of crude oil and condensate for private sector refineries.

If everything stays on course, it would take around four months for the listed refinery to resume production in its condensate fractionation unit, expect analysts. 

The Ministry of Power, Energy and Mineral Resources on Sunday announced that it would allow the Bangladesh Petroleum Corporation (BPC) to import crude oil and condensate for both the private and public sector fuel producers.

Based on the annual demand submitted by the companies, the BPC would import and supply required raw materials of the fuels and also would remain the only legal buyer of the final products from the plants. 

BPC Operations Director Syed Mehdi Hasan told The Business Standard that his corporation might begin the imports in March 2022.

From edible oil refining to fuel production

In the 1980s, a group of Chattogram-based entrepreneurs formed Chittagong Vegetable Oil Industries Ltd to refine soybean oil and market those under their own brand 'Fulkopi'.

The profitable company went public in 1990 and was doing well in business until the end of that decade when a few gigantic business groups made huge investments to grab the country's big market for edible oil.

Since, no policy was formulated to protect the small edible oil refiners like Chittagong Vegetable Oil Industries against the deep-pocket importers, most small refiners went broke in business in the early 2000s, said Khwaza Mowin Uddin Hossain, company secretary of CVOPRL.

After nearly a decade of struggle, Chittagong Vegetable Oil Industries changed its course in business and transformed into a private sector fuel producer under the licence of the Energy and Mineral Resources Division.

The publicly listed company changed its name to CVO Petrochemical Refinery Ltd.

In 2014, it began fractionating natural gas by-product condensate supplied by local gas fields to produce petrol, diesel, and kerosene.

The quality issues and series of disruptions

In 2016, state-owned Sylhet Gas Fields Ltd stopped supplying condensate to CVOPRL plant following the Energy and Mineral Resources Division's order as the company, among some others, was found to be directly selling its products in the market instead of sticking to its obligation for selling to the BPC only, which caters to the entire market with fuel oil through state-owned fuel distributors - Padma Oil, Meghna Petroleum, and Jamuna Oil.

The company secretary of CVOPRL said the BPC was not used to buying all of its products during that time, forcing the companies to sell the remaining fuel in the open market.

He said fractionation plants cannot only produce what is selling well.

However, the condensate supply resumed in 2017 and the company came back into production and started bulk supply to the BPC.

Again, in the middle of 2020, CVOPRL's production shut as the Bangladesh Standards and Testing Institute (BSTI) found its petrol not meeting the BSTI standards.

Khwaza said the company suffered for two different standards demanded by the Energy and Mineral Resources Division and the BSTI.

"Our plant was capable of meeting both the standards, but the local condensate was not able to yield the higher standard fuel, especially diesel production," he said.

For example, the Energy and Mineral Resources Division asked the company to ensure at least a research octane number (RON) of 82 for its petrol while providing a licence, whereas the BSTI asks for a RON of 87 in petrol.

However, since the mid-2020, a total of 18 fractionation plants were shut amid the quality concern including the CVOPRL's one. Six of the non-CRU (non-Catalyst Reforming Unit that cannot produce high RON-gasoline popularly called Octane in Bangladesh) plants are from the public sector and the remaining 12 are owned and operated by the private sector.

Imported condensate would yield high quality diesel and non-CRU plants would get rid of wastage in diesel that was taking a toll on company revenues and profits, said the company secretary of CVOPRL.

"We will be able to supply the best quality diesel and petrol out of the imported diesel-rich condensate, if the BPC can give us the condensate we need," he added.

Imported raw materials would be a game changer for private refineries and fractionation plants, he believes, as for the first time this would be available for all the plants.

He was yet to see any document regarding the ministry decision while talking to this reporter on Sunday afternoon. 

There are three private sector CRU refineries operating in Bangladesh, alongside the state-owned ones, which refine crude oil or condensate to produce octane, petrol and diesel, he informed.

Emerging as the first chemical solvent producer

Chemical solvent which is used in cleaning and washing across industries are an imported chemical product right now and CVOPRL is preparing its facility to be the first solvent producer of the country.

Earlier this year, the company signed a contract with the BPC to buy 25,000-30,000 tonnes of Naphtha each year and process those to produce solvent and sell to the BPC again for some profit margin.

His company might demand 15,000-20,000 tonnes of condensate from the BPC each year for its fractionation plant, he added.

CVOPRL's share price rose to Tk194.2 each on Tuesday from Tk158 at the end of last week.