Bangladesh News

A Tk 350 crore project for producing octane from naphtha that became uncertain due to withdrawal of its main investor Exxon-Mobil has got new foreign investors and the project is now progressing in full swing.

A top official of Mobil Jamuna Fuel Company (MJFC) said Exxon-Mobil’s 50 percent equity is now being taken over by the International Finance Corporation (IFC) of the World Bank Group, DAG of German government and FMO of the Netherlands government. The project is set to be completed by 2009.

The government in November last year signed a contract with Bangladesh-US joint venture MJFC to set up the naphtha processing plant in Chittagong for producing octane from naphtha– a by-product of imported crude oil.

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 its entire local demand. It will also help best utilise naphtha — a kind of natural gas by-product.

The plant will produce the highest quality octane. The country now has supply of octane that is a mixture of low quality Octane 88 and best quality Octane 95. The MJFC will produce only Octane 95.

French government company Axen will provide technology for conversion of naphtha into octane. Only two companies in the world have licence for this technology. Officials of the other company — UOP of USA– had previously visited Bangladesh but said the project was too small.

“Axen has done initial study and gave us a pre-condition that the project must be made compliant with the Euro-3 environment standard. This means the project has to be emission-free and sulphur-free,” said the official.

Axen is now conducting final feasibility study for the project while a local company named Ecomac is conducting environmental impact study. These studies will be completed by mid-September.

“The project’s financial closing will be completed by November and from December floating of tender for construction of the plant will take place,” the official said.

Meanwhile, the government has asked the Chittagong Port Authorities to evict 150 illegal settlers from a canal’s bank near the site of the proposed plant to comply with the project’s environmental requirements. The MJFC will help these people resettle through a negotiation.

Initially, the government will sell 100,000 tonnes of naphtha to this plant annually to produce 80,000 tonnes of octane plus another 10,000 tonnes of Liquefied Petroleum Gas (LPG). The import-substitution value of this LPG is another six million dollars or Tk 40 crore.

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

Following the success of Mobil Jamuna Lubricant (MJL) venture, which was launched in 2004 as per a 1998 contract, the MJL had been pursuing the idea since 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 market for naphtha, the Eastern Refinery sells out this naphtha to international buyers but at a price $5 to 8 per tonne less than that in the Singapore market. The MJL then suggested that the government could sell the same to the MJFC at the Singapore rate having a higher price.

Now the government will sell naphtha to the new venture at a higher rate and save foreign exchange for import of refined octane.