Chinese firm gets contract to build oil pipeline
A project to set up a pipeline to carry oil from tankers in the Bay of Bengal to storage plants on the mainland will finally see the light of day after a six-year delay, but the cost will jump four times the initial amount.
The cabinet committee on economic affairs yesterday gave the go-ahead to China Petroleum Pipeline Bureau under a government-to-government deal to install the pipeline.
The cost of the project now stands at Tk 5,426 crore or $694 million, with China's Exim Bank giving $550.4 million in low-cost loans. It is expected to be completed by 2018.
When the project was first approved by the Executive Committee of the National Economic Council in 2010, the cost was estimated at $159 million and was set to be implemented by 2012.
As the cost estimate rose to $632.82 million thanks to several amendments, the project was reapproved in December 2015.
A high official of Eastern Refinery Ltd said the project first proposed to build a single pipeline, but it was later changed to a double pipeline. The first project design was faulty and hence, a German consultant firm changed it, he added.
The cost went up due to changes in the design and extension of the timeframe, according to the official.
Under the project, the Single Point Mooring installation will be built in the Sonadia Island area at deep sea, where large oil tankers will anchor.
As per the latest project design, one large 36-inch pipeline will be built there to pump the oil to a storage plant 32km away on the Matarbari Island in Maheshkhali. Earlier, the length was 16km.
There will be another 18-inch pipeline that will be 188km long, which was 94km long previously. One pipeline will pump crude oil and the other diesel.
At present, large tankers anchor at deep sea and smaller ships unload and bring the oil to Eastern Refinery in Chittagong. The process called lightering is an expensive operation and takes 11 days to unload 1 lakh tonnes of oil. Other than time and cost, a lot of oil is systematically stolen during the process as well.
But if a pipeline is installed, it will take just two days to empty a vessel carrying such a volume of oil. This would cut cost and stop the pilferage, the official said.
According to ministry estimates, the pipeline will save the government Tk 1,000 crore a year and the project cost would be recovered in five to six years.
The Islamic Development Bank was initially expected to finance the project, but as the cost shot up, it withdrew.
Later, the Chinese government expressed its interest to finance the project and nominated China Petroleum Pipeline Bureau for the job.