BPC goes for costly diesel purchase

Import of diesel at higher premium is costing Bangladesh Petroleum Corporation (BPC) dearly in this quarter--April to June, 2009.
The BPC is now importing 1.5 lakh tonnes of diesel every month from Malaysian Petronas Trading Corporation (Petco) at $5.98 per barrel premium--for freight, insurance and other charges in addition to the fuel price.
Kuwait Petroleum Corporation (KPC) in price negotiations with BPC early last month had offered $5.25 per barrel premium. The BPC is now importing diesel with 0.73 cents more premium per barrel.
The BPC had also agreed to a two-year deal with KPC to buy eight lakh tonnes of fuel annually including 1.30 lakh tonnes of diesel to be supplied in this quarter.
The deal is yet to be signed.
BPC Chairman Anwarul Karim said KPC relaxed the conditions of opening Letter of Credit (L/C) with international banks and brought down premium to below $5.30 from $6.60 per barrel in early March negotiations.
"At the final stage of the process of signing the agreement, KPC proposed to raise the age limit of its tankers [that would supply the fuel to Bangladesh] to 25 years," he said.
"Usually such tankers are between 15 years and 20 years old.
It required examining of the international maritime rules to see if such old tankers could be used for carrying fuel. So we wrote to director general (DG) of shipping for clearance before signing the agreement," said the BPC chairman talking to The Daily Star yesterday.
The deal signing is being delayed due to this.
Since 2003, Bangladesh has been importing 22 lakh tonnes of petroleum products annually from KPC renewing agreements every two years and re-fixing the firm premium every six months, sources said.
But the BPC did not renew its contract with KPC before it expired last December.
The BPC chairman said, "KPC cancelled at least three shipments between April and September last year before cancelling four shipments in December, when the demand was at the highest."
The BPC contacted Petco then.
As other sources were unable to supply fuel before June, BPC had to extend the contract to Petco to provide 15 lakh tonnes of petroleum products till December this year, BPC Chairman Anwarul Karim said.
"And since KPC brought down premium and relaxed two other conditions in early March meetings, the BPC reached an agreement with it," he added.
"With the signing of the agreement expected soon, BPC would buy fuel from KPC in the next two years--eight lakh tonnes annually," said the chairman.
BPC Director (operations and planning) Syed Mozammel Haq said BPC in refined and crude forms imports two lakh tonnes of diesel, 8,000 tonnes of petrol and octane, 15,000 tonnes of kerosene and 1,25,000 tonnes of aviation fuel on an average month.
He said at present all the imports are being made from Petco. But when the deal with KPC is done, the quantity of import would be divided equally between KPC and Petco.