Govt to produce octane in 2009

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Bangladesh is all set to produce octane from naptha, a byproduct of imported crude oil, in 2009, according to a competent energy ministry source.

This will help the oil importing country to save its foreign exchange for import of 120,000 tonnes of refined octane worth Tk 480 crore a year to meet the entire local demand. It will also help best utilise naptha, one kind of natural gas byproduct.

The government in mid-November signed a contract with Bangladesh-US joint venture Mobil Jamuna Fuel Company (MJFC) to set up a naptha processing plant in Chittagong, which will produce octane from naptha.

The MJFC will invest $300 million to set up this plant.

Sources said the Mobil-Jamuna board headed by Energy Secretary M Nasiruddin will hold a meeting within a month to approve the investment. A 30-month construction of the plant will follow this.

Initially, the government will sell 100,000 tonnes of naptha to this plant annually to produce 80,000 tonnes of octane plus 10,000 tonnes of liquefied natural gas (LPG). The import-substitution value of this LPG is another six million dollars or Tk 40 crore a year.

The government would gradually increase supply of naptha so that this plant produces enough octane to meet the country’s entire demand.

Success of the Mobil Jamuna Lubricant (MJL) venture, launched in 2004 following the 1998 contract, prompted the MJL to pursue the idea from 2005 noting that the Eastern Refinery produces around 150,000 tonnes of naphtha while processing 14 lakh tonnes of imported crude oil.

As there is no domestic demand for naptha, the Eastern Refinery sells it out to international buyers, but at a price $5-8 lower per tonne than that in the Singapore market.

The MJL then suggested that the government could sell naptha to the MJFC at the Singapore rate earning a higher revenue.

” The government would therefore benefit on two counts — selling naptha at a higher rate and saving foreign exchange needed for import of refined octane,” one source pointed out.

The country imports 24 lakh tonnes of refined fuel oil. Because of international price hike, this import has caused losses of thousands of crores of taka to Bangladesh Petroleum Corporation (BPC) and made it a top loan defaulter with the nationalised commercial banks. The BPC is now plagued with financial liabilities to various local and international banks. This project can give it a great relief.

“We have assigned a consultant to file a report on this project,” said the energy secretary. “We will learn the details about its benefits within a few days. But it is definitely a good project.”

He went on, “This will also save octane transportation time and cost. Naptha will be delivered from the Eastern Refinery through a pipeline. We will not have to depend on the port services to unload the octane supplies. Plus, the BPC will get a relief.”

In addition, this octane will be of the highest quality. The BPC now mixes lower quality octane 88 with the best quality octane 95, and markets that mixture and saves some cost. The MJFC will produce only octane 95 and there will be no scope for mixture.

The MJFC will sell this octane to the oil distributing companies at a very profitable rate, which will be determined by the market condition.

“This is going to be the first small private-public refinery. This plant will be compliant with the ‘Euro 3′ environmental standard, which means it will have zero sulphur emissions,” said an official.

“There are only two licensees of the technology on converting naptha into octane. One is the UOP of USA and the other is Axen of France. Axen is issuing a licence for us. This is also a great success for Bangladesh,” he added.

The MJFC is presently owned by US oil giant Mobil with 50 percent share. Its partners government-owned Jamuna Oil company and local private company East Coast have 25 percent shares each.

Sources said the IFC (of the World Bank) and DAG (of Germany) have expressed interest to participate in the equity.

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