IsDB, Bangladesh sign $1 billion financing deal to upgrade country’s sole oil refinery
DHAKA: Bangladesh is set to expand its sole crude oil refinery with a $1 billion financing loan from the Islamic Development Bank, a project expected to help reduce the country’s dependence on imported fuels.
Prime Minister Tarique Rahman and IsDB Group Chairman, Dr. Muhammad Al-Jasser, witnessed on Thursday the signing of the financing agreement for the Modernization and Expansion of the Eastern Refinery Project in Dhaka.
The project, scheduled for completion in November 2030, is expected to add 3 million metric tons to the refinery’s annual capacity, which will bring its yearly total to 4.5 million metric tons.
Financing for the facility’s expansion will be a combination of IsDB’s $1 billion loan and another $1.5 billion from the Bangladeshi government.
“By expanding domestic refining capacity, the Eastern Refinery project will strengthen energy security, reduce dependence on imported refined petroleum products, and support cleaner fuel standards,” Al-Jasser said, referring to the new financing deal as a “major milestone” in IsDB’s partnership with Bangladesh.
Bangladesh, a major energy importer, has been struggling with fuel-price volatility and supply disruptions triggered by the instability in the Middle East following US-Israeli attacks on Iran in late February, raising concerns over energy security in the country of 175 million people.
The state-owned Eastern Refinery currently has a refining capacity of 1.5 million metric tons, while the South Asian nation, which imports most of its fuel, requires about 6.5 million metric tons of crude oil annually.
“The Eastern Refinery Modernization and Expansion Project is not just an energy investment. It is an investment in our energy security, our economic resilience, and our long-term capacity to grow,” the Bangladeshi premier said during the signing ceremony.
The new upgrades will allow the refinery to process a broader range of crude oils and produce 15 types of refined petroleum products, according to IsDB. Local refining of imported crude oil is expected to save Bangladesh around $394 million each year.
The expansion of Bangladesh’s only crude oil refinery, which has operated for nearly 60 years, was “very timely” and “should have been done much earlier,” according to Prof. Mohammed Mahbubur Rahman, who heads the petroleum and mineral resources engineering department at Bangladesh University of Engineering and Technology.
“When Russian crude oil became very cheap, we couldn’t take advantage of that opportunity. Because that crude oil couldn’t be fed into our refinery … With the new refinery, our capacity expansion and flexibility—all of these things will increase. That’s from a technological point of view,” he told Arab News on Friday.
“I believe this is a very good initiative, and this will be helpful for us because Eastern Refinery’s capacity is limited, and it has become so old that it won’t be possible to run it efficiently or profitably for much longer … I would certainly call this a groundbreaking step.”
