Tk8,300cr oil pipeline project idle for 6 months. An operator is just what it needs

The failure to appoint an operator has left the Tk8,298 crore Single Point Mooring (SPM) project idle for six months since its commissioning. Meanwhile, the state-owned oil refinery is still spending Tk66 crore every month in sea-to-plant transportation of imported petroleum oil.

Located 16km offshore from storage tanks at Matarbari in Cox's Bazar, the floating buoy is connected by 110km double pipelines – 73km offshore and 37km onshore – to carry crude petroleum oil and diesel from mother vessels to storage tanks in Maheshkhali and then to Eastern Refinery Ltd depots in Chattogram's Patenga.

The China-funded project is expected to save around Tk800 crore annually by cutting time from 11 days to two days to transfer 1 lakh tonnes by chartered lighterage vessels that cost Tk66 crore per month.

Under the project, six storage tanks have been built in Maheshkhali adding a capacity of 200,000 tonnes to Eastern Refinery, enabling it to stockpile oil for two-and-a-half months' need – providing a buffer for supply disruptions.

But all these benefits remain elusive as the Single Point Mooring does not have an operator.

ERL Managing Director Sharif Hasnat, who is also SPM project director, could not be reached for a comment on why it failed to get an operator though the facility had its trial run in July last year and has been lying ready for use since March. Despite multiple attempts, he did not respond to calls from The Business Standard.

Mohammad Amin Ul Ahsan, chairman of ELR's owning authority Bangladesh Petroleum Corporation (BPC) said getting an operator for SPM may take 3 to 6 months.

He said the expert committee on public procurement regulations (PPR) has already submitted a report recommending the process to the ministry to hire an operator for SPM.

"We are expecting to receive it within three-four days. As soon as we receive the recommendations, we will launch the process," he told TBS.

What caused the delay

Officials at the BPC, said the initial plan was for the SPM to be operated by a private organisation for the first 18 months, with BPC staff being trained to take over operations from the second year.

Considering that local operators are not equipped to handle a project of such complexity and scale, the then Awami League government was planning to appoint a global operator to run the SPM efficiently soon after its commissioning, they said.

As the Chinese firm that constructed the project itself was willing to operate SPM, the government was reviewing the offer.

BPC Director (operations and planning) Anupam Barua said, "China Petroleum Pipeline Engineering Company Ltd, which constructed the SPM, showed interest in operating the project for three years.

"The ministry had also formed a committee to review their proposal under the Special Energy Security Provisions. The committee held two meetings too. However, the process got stuck due to political turmoil in July."

Unsolicited contract signing was allowed under the Quick Enhancement of Electricity and Energy Supply (Special Provision) Act 2010 to expedite the hiring process for critical energy projects like the SPM.

Soon after taking office, the interim government suspended special energy security provisions amid criticism and controversies around unsolicited energy and electricity projects. Now, any operator has to be selected through open tender under the Public Procurement Act, they pointed out.

Barua explained that the SPM project had originally been structured under the special energy security provisions. However, the change in government policy disrupted the operator recruitment process, he said.

"We are now exploring options under Public Procurement Regulations (PPR). We've already sought expert opinions to begin the recruitment process. If we receive recommendations soon, we can proceed with a limited tender for quicker hiring. Otherwise, we may have to follow the longer open tender process," Barua said, adding that they might need to rely on foreign operators for SPM.

Safety and operational risks

The quick start of SPM's commercial operation is now being felt more urgently than ever before. In the absence of the project's operation, Eastern Refinery has continued to transport crude oil using two lighterage ships.

The transportation arrangement had a major setback as Banglar Jyoti, one of its two hired vessels, had a massive explosion on 30 September along an ERL jetty, claiming three lives. Although the country's only state-run refinery narrowly avoided a potential catastrophe, these ageing ships continue to pose a serious threat to Bangladesh's energy security.

These two vessels, Banglar Jyoti and Banglar Sourav, owned by another state-owned agency Bangladesh Shipping Corporation (BSC), are hired to transport crude oil from mother vessels anchored in the Kutubdia Channel to ERL's refinery. With one now out of service, the other one does double duty, significantly slowing the oil transport process.

Time, cost doubled with no output yet

The SPM project, undertaken by Eastern Refinery Limited in 2015, was designed to seamlessly transfer fuel oils from mother vessels to storage tanks and refineries to cut transportation time and freight costs.

After several reviews, the project time doubled and cost shot up to Tk8,222 crore from the initial estimate of Tk4,936 crore, due to inclusion of additional construction works, exchange rate changes and taxes.

Finally, it went into trial run in July last year, initiating unloading from a Saudi Arabian mother vessel carrying 82,000 tonnes of fuel oils. But a major technical glitch halted the process and it took up to December to repair.

The project's deadline was extended till June 2024 and finally it was commissioned in March 2024, nine years after it began.

Authorities now face pressure to fast-track the hiring of operators and fully operationalise the SPM project. For now, however, the delays continue, and the financial and safety risks remain.

In early 2019, construction of the dual-channel SPM system began with preferential loans from the Chinese government, financed by the Export-Import Bank of China. China provided $467.84 million as preferential buyers' credit and $82.5 million as a soft loan. The loan is to be repaid over 20 years at a 2% annual interest rate, with a five-year grace period.