A Z M Anas

A foreign consortium led by the Czech state-owned export bank is willing to invest US$ 2.5 billion in what will be the country's largest crude oil refinery at Kutubdia island in view of the robust demand for petroleum products in the region.

The proposed oil refinery will be erected on 400 acres of land in southern Chittagong and have an annual capacity of refining six million tonnes of crude petroleum, officials and the group's local sponsor said Sunday.

"We will be able to serve the entire Asian market, even challenging Singapore's long dominance in the refined oil market," Mahbubur Rahman, local honorary consular of the Czech Republic, told the Financial Express (FE).

The Board of Investment (BoI) said it has received the significant investment proposal and sent it to the Energy Division for its "no objection."

"We'll offer a 20 per cent stake to the government in lieu of the required land for the project," Mr Rahman, who is also the local sponsor, said.

Senior BoI official Abu Reza Khan said the establishment of the refinery would hinge on the finalisation of the policy, now at its draft stage.

The majority foreign-owned oil refinery would far dwarf the state-run Eastern Refinery Ltd (ERL), the production of which has stagnated for more than four decades.

Currently, ERL can refine 1.2 million tonnes of crude a year, making up around 30 per cent of the country's total demand.

Bangladesh Petroleum Corporation (BPC), which refines crude oil and markets petroleum products in the local market, procures the remaining mostly from the Gulf countries.

The foreign consortium group includes the state-run export banks of the United States, Germany, the Netherlands, France, Italy, the United Kingdom and the Czech Republic.

The foreign investment proposal comes at a time when at least two Bangladeshi business groups are pressing ahead with plans to establish oil refineries also in Chittagong.

"We will start construction work in six months after obtaining the government approval," Mr Rahman said.

He said the group's plan is to boost production by six times to 24 million tonnes in the next 10 years.

"Total capital infusion may reach $10 billion," Mr Rahman said.

He noted that the Czech Republic, partnering with the Indian government and India's corporate goliath Reliance Group, built an oil refinery in Gujrat state, investing as much as $6.0 billion.

He insisted that the mammoth project would not be hobbled by the capital crunch even as credit markets in the west remain tight under pressure from the global recession.

Mr Khan, of the investment board, said his agency would give its go-ahead for the multi-billion dollar project after Bangladesh approves the Private Oil Refinery Establishment Policy 2009.

Local conglomerate Bashundhara Group is planning to establish an oil refinery in Chittagong investing nearly US$ 700 million with an annual capacity of 2.5 million tonnes of crude oil.

The embattled business group's proposed refinery would be built on 112 acres of land it acquired on the south bank of the river Karnaphuli.

East Coast Group, another business group, has also unveiled a plan to invest $110 million for a refinery in Chittagong to produce octane.