Single-Point Mooring installation at Maheshkhali

[Dark Carnage]

Sluggish single-point mooring construction to eat more funds and time

Construction progressed only 15 percent in four years

The single-point mooring construction in Moheshkhali, aiming at offloading imported petroleum products at reduced cost and time, has been moving at a slow pace with only 15 percent progress in four years.

Initially, the project titled "Installation of Single-Point Mooring with Double Pipeline" began under the Energy and Mineral Resources Division in 2015 with a target to complete by 2018. But the project duration was extended by one year and the cost by over Tk490 crore.

Now, the government body has again sent a proposal to the Planning Commission, seeking over Tk1,200 crore of further increase in the cost and a two-year extension in the project duration.

The total increased spending will therefore be over Tk1,693 crore, which is about 34 percent of the initial Tk4,936 crore project allocation.

On December 8 last year, the Project Implementation Committee (PEC) meeting asked the project implementing agency for the reason behind stagnation in the work. Planning Commission's Senior Secretary Shahin Ahmed Chowdhury presided over the meeting.

The meeting also inquired into the reason for the cost escalation as well as recommended the agency – Eastern Refinery Limited – to revise the fresh proposal by rationalising the cost.

Eastern Refinery told the PEC the work did not accelerate as the deal signed with China Petroleum Pipeline involved an amount of nearly Tk400 crore more than the allocation for construction. Besides, the loan agreement with China's Exim Bank took more time to get inked.

Apart from that, the loan agreement with the Chinese bank was signed in December 2017 but it came into effect in April the next year. After that, only eight months were left to complete the project.

According to the latest proposal, the China Petroleum Pipeline will construct the single-point mooring system within August 2021. The Energy and Mineral Resources Division has sought a grace period of four more months for the completion of the construction.

The division said an increased spending due to changes in the dollar exchange rate, land acquisition and unavailability of tax rebates for the project, including registration, bank charge and licence fee, will push up the cost.

According to the proposal, the exchange rate of US dollar was initially estimated at Tk78 but it is Tk84.90 now. If the present trend continues, the dollar exchange rate within the project time will grow to Tk86, to cause an extra spending of Tk422 crore in the form of agreement value, VAT and consultancy service.

Also, the National Board of Revenue (NBR) was initially reckoned to grant tax rebates for the project, but the government exchequer did not respond positively to the energy division's call for it. As a result, the project would additionally need Tk553 crore to pay customs duty and VAT to the NBR, according to the fresh proposal.

Besides, the land price, including compensation, in the original project was fixed at one-and-a-half times more than the real value, as per the 1982 law. But under the 2017 law, the land is costing three times more than the real rate, adding about Tk135 crore to the total spending.

Planning Commission's Senior Secretary Shahin told The Business Standard that costs for several parts of the project have increased because of a sluggishness in the work. "But in the fresh proposal, the cost has increased unusually as the dollar exchange rate has been estimated at a price more than the market value.

"Besides, the construction deal with the Chinese company has been signed for an extended period before increasing the duration for the project," she added.

The senior official further said there is also a rule that binds government bodies responsible for project implementation to send a proposal for revision to the Planning Commission three months before the project duration ends. But the Energy and Mineral Resources Division did not follow it.

When asked, Project Director Md Sharif Hasnat, the deputy general manager of the Bangladesh Petroleum Corporation, declined to comment on the issue.

Meanwhile, Dr Shah Mohammad Sanaul Haque, the joint secretary at the Energy and Mineral Resources Division, referred to the Bangladesh Petroleum Corporation and the Eastern Refinery to seek comments.

BPC Chairman Md Anisur Rahman did not respond to several phone calls and a text message from The Business Standard.

According to the project proposal of the Energy and Mineral Resources Division, Eastern Refinery at present can refine only 15 lakh tonnes of high-speed diesel against a demand of about 50 lakh tonnes.

Due to infrastructural constraints in the Chattogram seaport as well as a low navigability in the Karnaphuli River, large oil tankers cannot come to the port. They have to anchor in the deep sea and smaller ships unload and bring the oil to storage facilities of the Eastern Refinery. It takes up to 11 days to offload oil from tankers.

Bangladesh annually imports around six million tonnes of crude and refined oil combined, of which around 1.3 million tonnes are crude oil and the remaining are refined petroleum products.

However, the entire process is expensive, risky and time-consuming. Under the present management, it will be difficult for the government to meet the growing need for fuel oil in the country.

The single point mooring system, once constructed, will help to offload 1.2 lakh tonnes of crude oil within only 48 hours and 70,000 tonnes of diesel in 28 hours. Its annual capacity to offload oil will be nine million tonnes, and it will be able to save Tk800 crore per year.

After the project completes, liquid fuel oil will be carried to Moheshkhali Island through the pipeline from large tankers anchored in the deep sea. Later, the 110-km pipelines installed under the Bay of Bengal and in coastal areas will directly carry the oil to the Eastern Refinery in Chattogram from Moheshkhali.