Bangladesh to allow private investment in refineries

                                
 DHAKA, Aug 29 (Reuters) - Bangladesh will allow private
sector investment to set up oil refineries both for domestic use
and export, a senior official said on Saturday.
                                
 "The government will allow private investment in the sector
only if a firm promise to invests at least $1 billion dollars
and they will be permitted to export if the government declines
to buy the products," said Anwarul Karim, chairman of the
state-run Bangladesh Petroleum Corporation (BPC).
                                
 BPC is the lone importer and distributor of oil and annually
imports 3.4-3.8 million tonnes of oil including about 1.5
million tonnes of crude oil at a cost of up to $3 billion.
                                
 The government has prepared the Private Oil Refinery
Establishment Policy 2009 after the energy ministry received
proposals from local and foreign firms to invest in the sector.
                                
 Two of the country's leading conglomerates, Basundhara and
Mobil Jamuna Fuels Limited, and a Czech and a Saudi oil firm,
sought approval to install oil refineries in the country.
                                
 Investors see Bangladesh as a market ripe for oil refining
as the lone state-owned company Eastern Refinery Limited (ERL)
can refine only 1.5 million tonnes of crude oil a year, though
demand for oil is increasing at 25 percent yearly.
                                
 Refining is still a no-go area for private investors but the
government has recently said it would end its monopoly in the
key sector after preparing a policy that would regulate
investment in refining.
                                
 Basundhara Group has already floated a $700 million proposal
to build the country's first private refinery in Chittagong.
                                
 MJFL, a Bangladeshi firm will also set up a fuel plant to
produce high octane at Chittagong port city, at a cost of $110
million, by using naphtha.
                                
 The Czech state-owned export bank also submitted a proposal
to invest $2.5 billion in the country.
                                
 "Private refineries will be barred from producing any
petrochemical other than refining crude oil," Karim told
Reuters.
                                
 ERL has asked for a $300 million loan from the Jeddah-based
Islamic Development Bank to expand its capacity to 4.5 million
tonnes.
                                
 It also refines condensates, collected from the country's
natural gas fields, to petrol and diesel. Bangladesh's present
condensate production is 5,000 barrels per day.
                                
 In Bangladesh, the price difference between refined and
crude oil is up to $10 per barrel, officials said.
                                
 ($1= 69 taka)
 (Reporting by Serajul Islam Quadir, editing by Mike Peacock)