Government authorities have moved to restart import of petroleum products from the international oil market through tendering instead of term deals that are allegedly fraught with faults.

The process kick-starts this very month, after a lapse of 15 years, officials said.

The objective is to ensure greater transparency in the deals.

“We have taken initiative to float international tender in the current month to import oil through competitive bidding,” Bangladesh Petroleum Corporation (BPC) Chairman AM Badrudduja told the FE Tuesday.

The BPC decided to go for tendering to source oil from international oil market in line with a recent directive from the Energy and Mineral Resources Division (EMRD) under the Ministry of Power, Energy and Mineral Resources (MPEMR).

Intl bidding to replace term deals with suppliers

A senior EMRD official told the FE that the ministry instructed BPC to reintroduce tendering system for petroleum sourcing to make sure it gets oil at lower prices compared to the term deals.

He said it would help in bringing about better transparency in the corporation’s oil purchase from the international market.

Currently the state-run oil import and marketing monopoly (BPC) imports petroleum under term deals with the suppliers.

The corporation is now bagging huge profit in oil trade by cashing in on the downturn in global oil prices. The price of Brent crude, the benchmark in oil price, hit a rock-bottom level of around $50 a barrel. It’s rated as a five-year low.

BPC negotiates premium rates for every six months following negotiations with the suppliers.

‘Local representatives’ of oil suppliers aid BPC in the negotiation, said BPC officials.

Allegations are also rife from industry-insiders about the delivery of less-than-specified quantity of petroleum products by the suppliers, said sources.

Private-sector oil importers went for massive-scale import of furnace oil, refraining from purchasing the fuel from the BPC on allegation that the quality of oil imported by the corporation was ‘substandard,’ they said.

The corporation had earlier imported petroleum products through international tendering since its inception in 1977 until 2000, the BPC chairman said.

It went for inking term deals with the oil suppliers from 2000 as the then contractors used to make delay in petroleum supply and the oil they were providing was “substandard”, said Mr Badrudduja.

BPC has a standing target to import around 5.81 million tonnes of petroleum products in 2015, up 7.50 per cent over the previous calendar yea.

Of the imports, BPC requires 1.4 million tonnes of crude oil and the remaining are refined petroleum products like diesel, furnace oil, jet fuel, and octane.

Diesel import accounts for more than half of the total imports as the corporation has imported around 3.5 million tonnes over the past several years to meet a mounting domestic demand.

BPC’s overall oil import has been on a steady increase over the past several years to meet the rising local demand, especially for oil-fired power plants.

Industry-insiders said BPC’s current oil suppliers could be affected with its latest decision to source petroleum through tendering.

BPC currently has term deals with Saudi Arabian Oil Company (Saudi Aramco), Abu Dhabi National Oil Company (ADNOC) of UAE to import crude oil for its wholly owned subsidiary, Eastern Refinery Ltd in Chittagong.

For importing refined petroleum products, it has annual term deals with Kuwait Petroleum Corporation (KPC), PETCO Trading Labunan Company Limited (PTLCL), Emirates National Oil Company (ENOC), Petrochina (Singapore) Pte. Ltd, Petrolimex (Singapore) Pte. Ltd, Philippine National Oil Corporation (PNOC-EC), Bumi Siak Pusako (BSP) of Indonesia, Unipec Singapore Pte Ltd of China, PB Trading Senderian Berhad of Brunei, Turkish PetroleumInternational Company and Oman Trading International Ltd.