05 Jan 2017, 00:15:02
Bangladesh-India fuel pipeline project hits fresh snags
Indian firm reneges on MoU terms
M Azizur Rahman
The construction of the proposed 130-kilometre cross-country pipeline to carry diesel is facing yet another setback as the Indian firm has, allegedly, reneged on the agreed term of bearing the costs, said sources.
India's state-run Bharat Petroleum Corporation Ltd (BPCL) in a recent letter to the Bangladesh Petroleum Corporation (BPC) agreed to provide the pipeline construction cost from Indian credit line instead of its own coffer, a senior BPC official said.
It is a violation of the terms of memorandum of understanding (MoU) inked between the two companies in October last year as the BPCL had agreed to build the pipeline at its own cost to export around 1.0 million tonne of diesel to Bangladesh for 15 years, said the official.
The BPCL in its letter requested the BPC to inform about the latter's position over the changed status.
The BPC has not yet responded to the BPCL letter.
"We would not be interested to bear the cost of building the pipeline deviating the terms of the MoU," said the BPC official.
"If we have to bear the cost, we might not go for Indian credit line," he added.
In that case, the premium rate might have to be re-negotiated, he added.
In the MoU, the BPCL had agreed to build the pipeline spending money from its coffer subject to import of diesel by state-run BPC from the BPCL's Numaligarh refinery in Assam for 15 years.
The BPC and the BPCL also had agreed to fix the premium rate of US$ 5.50 per barrel to Mean of Platts Arab Gulf (MoPAG) diesel assessments on cost and freight (CFR) basis meaning that the price would be above US$ 5.50 per barrel from international price of diesel.
The cost of fuel transportation and the loss from evaporation are covered from the premium.
Two state-run oil entities also had agreed to stall the initial plan of building a joint venture company to share the costs of building the oil-carrying pipeline.
The proposed pipeline would carry around 1.0 million tonne of diesel per year to Bangladesh's northern region, once it is constructed.
Diesel demand is around 1.10 million tonne in 16 northern districts of Bangladesh, the BPC official said.
Initially, the pipeline is planned to carry around 300,000 tonne of diesel to Bangladesh, which would gradually be increased to 1.0 million tonne.
They said the 130-km pipeline would touch Panchagarh, Nilphamari and Dinajpur inside Bangladesh to reach Parbatipur oil storage tanks inside Bangladesh.
Of the total 130 km, the length of pipeline inside Bangladesh would be 125 km and in India it would be of around five km, said officials.
Both the companies finalised pipeline route and tested the soil to quicken the installation of the pipeline.
But the row over fixing of premium rate delayed progress of building the first cross-country pipeline between the two neighbouring South Asian countries since then.
Initially, the BPCL was asking for a premium rate of around $8.80 per barrel to MoPAG diesel assessments, while the BPC was seeking the premium at par with international market.
Currently, the BPC has been importing diesel from international market at a premium rate of around $2.50 per barrel to the MoPAG diesel assessments on CFR basis.
Although the premium rate is higher, India's diesel consignment would save the BPC's expenditure on account of transportation of diesel to Parbatipur from Chittagong port, said sources.
Indian diesel would be consumed by clients around Parbatipur localities, said the official.
The BPC currently imports around 3.5 million tonnes of diesel annually to meet local demand.
Bangladesh-India fuel pipeline project hits fresh snags
Indian firm reneges on MoU terms
M Azizur Rahman
The construction of the proposed 130-kilometre cross-country pipeline to carry diesel is facing yet another setback as the Indian firm has, allegedly, reneged on the agreed term of bearing the costs, said sources.
India's state-run Bharat Petroleum Corporation Ltd (BPCL) in a recent letter to the Bangladesh Petroleum Corporation (BPC) agreed to provide the pipeline construction cost from Indian credit line instead of its own coffer, a senior BPC official said.
It is a violation of the terms of memorandum of understanding (MoU) inked between the two companies in October last year as the BPCL had agreed to build the pipeline at its own cost to export around 1.0 million tonne of diesel to Bangladesh for 15 years, said the official.
The BPCL in its letter requested the BPC to inform about the latter's position over the changed status.
The BPC has not yet responded to the BPCL letter.
"We would not be interested to bear the cost of building the pipeline deviating the terms of the MoU," said the BPC official.
"If we have to bear the cost, we might not go for Indian credit line," he added.
In that case, the premium rate might have to be re-negotiated, he added.
In the MoU, the BPCL had agreed to build the pipeline spending money from its coffer subject to import of diesel by state-run BPC from the BPCL's Numaligarh refinery in Assam for 15 years.
The BPC and the BPCL also had agreed to fix the premium rate of US$ 5.50 per barrel to Mean of Platts Arab Gulf (MoPAG) diesel assessments on cost and freight (CFR) basis meaning that the price would be above US$ 5.50 per barrel from international price of diesel.
The cost of fuel transportation and the loss from evaporation are covered from the premium.
Two state-run oil entities also had agreed to stall the initial plan of building a joint venture company to share the costs of building the oil-carrying pipeline.
The proposed pipeline would carry around 1.0 million tonne of diesel per year to Bangladesh's northern region, once it is constructed.
Diesel demand is around 1.10 million tonne in 16 northern districts of Bangladesh, the BPC official said.
Initially, the pipeline is planned to carry around 300,000 tonne of diesel to Bangladesh, which would gradually be increased to 1.0 million tonne.
They said the 130-km pipeline would touch Panchagarh, Nilphamari and Dinajpur inside Bangladesh to reach Parbatipur oil storage tanks inside Bangladesh.
Of the total 130 km, the length of pipeline inside Bangladesh would be 125 km and in India it would be of around five km, said officials.
Both the companies finalised pipeline route and tested the soil to quicken the installation of the pipeline.
But the row over fixing of premium rate delayed progress of building the first cross-country pipeline between the two neighbouring South Asian countries since then.
Initially, the BPCL was asking for a premium rate of around $8.80 per barrel to MoPAG diesel assessments, while the BPC was seeking the premium at par with international market.
Currently, the BPC has been importing diesel from international market at a premium rate of around $2.50 per barrel to the MoPAG diesel assessments on CFR basis.
Although the premium rate is higher, India's diesel consignment would save the BPC's expenditure on account of transportation of diesel to Parbatipur from Chittagong port, said sources.
Indian diesel would be consumed by clients around Parbatipur localities, said the official.
The BPC currently imports around 3.5 million tonnes of diesel annually to meet local demand.
