Crude supply uncertainty casts doubt over Eastern Refinery operations after 6 April

Highlights:

• ERL to exhaust current crude stock by 6 April
• Two planned crude shipments from Saudi Arabia and Abu Dhabi cancelled amid Iran conflict
• 1,00,000-tonne cargo expected in April at an additional 25 cents per barrel
• ERL has an annual refining capacity of around 1.5m tonnes
• Govt increasing refined fuel imports to meet demand amid supply disruptions 

Bangladesh's only state-owned oil refinery, Eastern Refinery Limited (ERL), may be forced to halt crude processing after 6 April due to a lack of fresh crude supplies, officials say, amid global supply disruptions linked to conflict in the Middle East.

ERL currently holds 37,990 tonnes of crude oil stock, which – at its present processing rate of 3,700-3,800 tonnes per day – is expected to last until 6 April. 

The refinery's maximum capacity is about 4,500 tonnes daily, but persistent crude shortages have forced reduced output. If no new supply arrives, crude oil processing could stop from 6 April, although secondary refining operations might continue for some time afterward.

Earlier this month, a planned 1,00,000-tonne crude shipment from Saudi Arabia's Ras Tanura terminal was cancelled, and another similar cargo from Abu Dhabi also fell through, leaving no crude deliveries this month. 

In response, the government has secured a guarantee for a 1,00,000-tonne shipment from Yanbu port in Saudi Arabia, albeit at a higher cost – about 25 cents extra per barrel. This delivery, however, is not expected to arrive before 6 April. 

Md Jahangir Kabir, general manager (Finance) of the Bangladesh Petroleum Corporation (BPC), told The Business Standard that authorities are in discussions with several new suppliers and have received assurances of crude deliveries next month. 

BPC officials added that although crude supplies are tight, imports of refined fuel products remain sufficient to meet domestic demand, and ERL is trying to maintain operations at a reduced pace to avoid public concern over fuel shortages.

Bangladesh imports roughly 6.5-6.8 million tonnes of petroleum products annually, with diesel and crude accounting for significant portions. Historically, about 1.5 million tonnes of crude annually has been imported from Middle Eastern countries and processed at ERL. In addition, the country imports nearly 4.5 million tonnes of refined fuel each year, mostly from India and China, while locally produced petrol and octane also help meet demand.

Established in 1968, ERL processes crude into around 16 petroleum products, including LPG, petrol, octane, kerosene, diesel and furnace oil. Its refining capacity has remained largely unchanged for more than five decades, and plans for a second processing unit – expected to significantly boost capacity and allow refining of a broader range of crude types – have been delayed by years of complications and slow approval processes.