Govt to import 3 lakh tonnes of diesel under direct procurement for April

Bangladesh has moved to secure 300,000 tonnes of diesel through the direct procurement method (DPM) to meet demand for April as uncertainty over supplies from long-term fuel contracts grows amid escalating tensions in the Middle East.

The emergency purchase follows concerns that regular suppliers may struggle to guarantee shipments amid disruptions linked to the ongoing conflict involving the United States, Israel, and Iran.

The decision was approved by the Cabinet Committee on Economic Affairs on 12 March, allowing Bangladesh Petroleum Corporation (BPC) to proceed with urgent procurement.

The ongoing conflict, nearing three weeks, has severely affected global shipping through the Strait of Hormuz, a critical corridor that has come under intense strain following its effective closure by Iran. 

The disruption has sharply reduced vessel traffic and stranded ships, affecting around one-fifth of global oil and gas trade and forcing many shipping companies to suspend operations on the route.

According to Energy Division officials, failure to secure diesel supplies for April could severely disrupt transport, agriculture, and other dependent sectors, leading to significant disruption to daily life.

"To buy the diesel, Bangladesh has already issued the Notification of Award to the suppliers," AKM Fazlul Hoque, joint secretary (Operation-1) of the Energy Division, told TBS.

Energy Division Secretary Mohammad Saiful Islam said the government had taken swift action to avoid supply disruptions.

"We have finalised the procurement of 300,000 tonnes of diesel under the direct procurement method to ensure supply stability in April," he said.

"Given the current situation, we had to act proactively," he added.

Two suppliers, one urgent objective

Under the deal, Dubai-based Petrogas International Corporation will supply 100,000 tonnes of diesel, while US-based A&A Oil and Gas will provide the remaining 200,000 tonnes.

Energy Division officials said the first shipment is expected to arrive as early as 27 March, well ahead of April demand.

Bangladesh typically consumes between 280,000 and 300,000 tonnes of diesel each month, making it the country's most critical refined fuel for transport, agriculture, and power generation.

Officials warned that any disruption in supply could quickly ripple across the economy, particularly during the ongoing boro irrigation season.

Price dynamics raise questions

However, officials familiar with the procurement said the pricing arrangements differ between the two suppliers.

The diesel sourced from Petrogas International Corporation has been benchmarked against Platts pricing, which reflects prevailing international market rates at the time of shipment.

In contrast, A&A Oil and Gas has offered a fixed price of $75 per barrel, which officials described as highly competitive under current market conditions.

According to Singapore Gasoil 10ppm (Platts), spot diesel prices in mid-March have been fluctuating between $143 and $172 per barrel, compared with around $85 to $90 per barrel before the Iran conflict.

In this context, the $75 per barrel offer appears significantly lower than prevailing market prices. However, the unusually low price has raised some concerns within the ministry.

"We are a bit concerned whether the supplier will be able to deliver as committed, especially considering the source of the fuel," the energy secretary said.

Sources indicated that the diesel supplied by A&A Oil and Gas may originate from Russian crude, potentially refined in a third country in West Asia before shipment – a process that could complicate logistics amid sanctions and wartime disruptions.

Why direct procurement now?

The government's decision to use DPM – permitted under Rules 91 and 107 of the Public Procurement Rules 2008 – comes as traditional supply routes face unprecedented pressure.

Roughly 20% of global oil and gas shipments pass through the Strait of Hormuz, a narrow maritime corridor now at the centre of heightened geopolitical tensions.

With rising risks of disruption, suppliers have become increasingly reluctant to commit to deliveries under long-term contracts.

"Due to the Iran war, supply from long-term contracts has become uncertain," said Saiful.

"We are now trying to source diesel from outside the Hormuz route."

Bangladesh imports refined fuel from eight countries – Malaysia, the United Arab Emirates, China, Indonesia, Thailand, India, Oman, and Kuwait. 

However, many of these suppliers rely on Middle Eastern crude transported through Hormuz, leaving the broader supply chain vulnerable.

As domestic demand rises steadily – particularly after the withdrawal of fuel rationing and ahead of the Eid-ul-Fitr travel season – industry insiders warn that even temporary disruptions in supply routes could trigger short-term shortages and price volatility.

To reduce such risks, the government appears to be prioritising speed over procedural formality, using direct procurement to secure shipments quickly rather than relying solely on long-term contracts, which officials say have become fragile amid the current geopolitical situation.

While the direct procurement method allows rapid decision-making, it also carries risks, particularly regarding pricing transparency and supplier reliability.

Officials insist that ensuring an uninterrupted supply remains the government's primary objective.

"There is no premium added in this purchase. We are buying diesel at a cheaper price than our long-term price," Energy Secretary Saiful said.

However, uncertainties remain over whether suppliers will be able to meet their commitments amid the volatile geopolitical environment.

According to energy division officials, as tensions around Iran continue to disrupt established trade routes and market stability, countries like Bangladesh – heavily dependent on fuel imports – are being forced to adapt rapidly.

For now, securing April's supply appears to be under control; however, with the conflict showing no signs of easing, policymakers may need to prepare for continued volatility in fuel sourcing, pricing, and logistics in the months ahead, they added.