As oil prices continue to slip in the international market, Bangladesh could save a staggering $1.5 to 2 billion this year. The country's oil importing agency Bangladesh Petroleum Corporation (BPC) that had been in the red from 1999 has started counting profits from September-October last. If the current oil price trend continues, this will save the government from the burden of heavy subsidy to t
he power sector that consumes costly fuel oil. It will also create the premise for slashing prices of diesel, octane, and kerosene for the domestic market. “We are making some good profits. All kinds of petroleum products are now profitable,” said BPC Chairman Yunusur Rahman. “But we have some backlogs,” he added. The BPC's cumulative loss now stands around Tk 5,000 crore; while the Biman Bangladesh Airlines owes it Tk 1,000 crore in arrears. Due to favourable international oil prices, the BPC nowadays doesn't need to request the government to provide it with funds to purchase oil periodically. The government's dependence on imported oil, specially furnace oil, shot up significantly from 2010 when it opted for a good number of oil-fired rental power plants as a short-term solution to the country's power crisis. Advertisement While the power units helped overcome the power crisis to a large extent, it brought in huge financial pressure on the Power Development Board (PDB) that is responsible for supplying oil to the power companies. The PDB required around Tk 5,500 to 6,000 crore subsidy annually, while the government, to offset the subsidy pressure hiked power prices several times in the last three years. “We just need the subsidy to cover the high price of fuel,” said a PDB high official seeking anonymity. “We know oil prices have dropped internationally and also at the domestic market in India. But till now, the government has not reduced oil prices, and we still need subsidy.” For now, the government has no plan to reduce domestic oil prices, as it is still observing the situation. In recent years, the country has been spending between Tk 34,000 and Tk 38,000 crore per year to import crude, refined and lube base oil. “If oil prices continue to stay at this level, we expect to save 35 to 40 percent of last year's oil import costs,” said the BPC Chairman. That will translate into an annual saving of around Tk 14,000 crore. Some officials said the government could save another Tk 1,000 crore in import bill if it could secure different kinds of refined and lube base oil directly from oil producing companies instead of sourcing them from various oil distributors. Bangladesh now buys refined oil from 10 sources, and only one of them is an oil producing company (Kuwait Petroleum Corporation or KPC). The rest are oil distributors. The country also buys 1.29 million tonnes of crude oil from two companies -- one from Saudi Arabia and the other from the UAE. Among the suppliers of refined oil, the KPC sells Bangladesh diesel and jet fuel. The BPC also uses the KPC's price as reference price when it buys oil from the other nine companies. “The BPC is presently buying diesel for $89.99 per barrel, including shipment; whereas the present market data shows the price should have been $85.68 per barrel. That means, while buying 25.26 tonnes of diesel till June next [in the current fiscal year], we are actually paying $81 million extra,” said an official. A similar situation prevails in case of buying furnace and jet oil, as the market price tends to be a few dollars lower than the BPC's purchase price of oil per barrel. “If the BPC followed a streamlined oil purchase policy where it would buy only from the oil producers, we believe it could have saved the country more foreign currency,” noted the official. “We actually don't have a policy guideline to buy oil though we buy some oil on state-to-state basis [the KPC]. But the distributors themselves are also state-owned companies,” explained the BPC chairman. “We select these companies on the basis of reports from our diplomatic missions. There is a little chance of buying oil from these distributing companies at a higher price.” He said Bangladesh preferred state oil producers but companies like the KPC were few in numbers. Back in 2007-08, there was a supply disruption from the KPC and that's when the government began widening the sources. “There are many issues here, but the only issue that we should look at is whether we are incurring losses by buying from such distributors,” said Yunusur Rahman.
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