Oil import costs to soar under govt-to-govt deals

Bangladesh Petroleum Corporation's cost on premium will escalate by at least 52 percent to 71 percent for importing petroleum products under government-to-government deals instead of open bidding.

The premium, which is the cost of shipping petroleum products and includes freight charges and insurance, was fixed at $4.4 per barrel for gas oil and $5.4 for jet fuel imports during the January-June period under government-to-government agreements.

Under the open tender that took place in April for the first time since 2005, the premium stood at $2.37-$2.57 for gas oil and $3.06-$3.54 for jet fuel per barrel.

The cabinet committee on purchase on Wednesday gave the go-ahead to BPC to import 14.64 lakh tonnes of gas oil and jet fuel under the government-to-government arrangement from nine countries.

The development comes after the purchase committee in December last year decided that BPC will import 50 percent of petroleum products a year through government-to-government deals and the other 50 percent through open tender.

Since the going market rate is used as the price of petroleum, the suppliers in an open tender differentiate themselves with their premium rates.

A BPC official told The Daily Star yesterday that they have been pursuing to fix the premium rate for government to government arrangement on the basis of the rate quoted by bidders in open tender for imports for the July-December period.

For instance, BPC has been negotiating with Kuwait Petroleum Corporation for premium at a rate of $2.3 per barrel, which is lower than the rate received in the open tender.

Asked why Kuwait Petroleum Corporation is offering such a low rate, he said the company produces oil and has its own ship, so they can quote lower rates.

The other countries have not come forward yet with such rates in the neighbourhood of Kuwait Petroleum Corporation's, he said.

“In future, we will try to fix the market rate in case of government-to-government arrangement as well,” the BPC official added.

The total cost including premium for importing the 14.64 lakh tonnes of gas oil and jet fuel has been estimated to be about $531 million.

The cost included 65,989 tonnes of furnace oil, whose premium has been set at $24 per tonne.

The BPC imports around 50 lakh tonnes of petroleum products annually at a cost Tk 50,000 crore to Tk 60,000 crore.