Kuwait Petroleum Inter-national (KPI) has scrapped its plan to construct a 10 million tonnes per year capacity crude oil refinery worth US$ 6.0 billion in Bangladesh in a major setback for future energy security, said officials.

The KPI, a subsidiary of state-run Kuwait Petroleum Corporation (KPC), is now keen to shift the site of its planned refinery to some other Asian countries, they said.

The Middle Eastern firm has called off its plan to build the refinery in Bangladesh despite the government’s move to offer it some 1,000 acres of land on Moheshkhali Island in the Bay of Bengal to construct the crude oil refinery.

KPI scraps plan to build crude oil refinery in BD

The land on the south-eastern island was earmarked for building the refinery by the KPI.

The Energy and Mineral Resources Division (EMRD) under the Ministry of Power, Energy and Mineral Resources planned to hand over the land to the KPI once all relevant formalities over the project are completed, a senior EMRD official told the FE.

A KPI delegation headed by President and Chief Executive Officer (CEO) Bakheet Al Rashidi visited Bangladesh in October 2014 when he expressed interest to build the crude oil refinery.

They held talks with state-run Bangladesh Petroleum Corporation (BPC) and senior EMRD officials before expressing interest for building the planned refinery.

The KPI had plans to build a refinery in the country with the capacity of 300,000 barrels per day, a senior BPC official said.

It had wanted that the refinery must have options for future expansion to meet the growing demand for petroleum in the country as well as in the region.

The Kuwaiti firm was eyeing to build a complex refinery to convert less valuable petroleum output into a valuable one, the official said.

The refinery project was planned for either a joint venture with BPC or KPI alone could build it with its international partners.

Currently, Eastern Refinery Ltd (ERL), the country’s lone refinery and a wholly-owned subsidiary of the BPC, has a plant with the capacity of 1.5 million tonnes per year which can refine 1.4 million tonnes crude oil per year at its de-rated capacity.

Officials said the government has long been trying to increase the country’s crude oil refining capacity to reduce its petroleum import costs and cope with the mounting demand for petroleum products.

BPC wrote letters to both KPC and KPI in March 2012, inviting them to set up an oil refinery plant in Bangladesh.

Bangladesh currently imports around 6.0 million tonnes of refined and crude oil every year, according to BPC statistics.

BPC imports 1.4 million tonnes of crude in total from Saudi Aramco and Abu Dhabi National Oil Company (ADNOC). Saudi Aramco and ADNOC are supplying 700,000 mt of crude each.

BPC imports refined petroleum products from KPC; Petco, the trading arm of Malaysia’s Petronas; Emirates National Oil Company, or ENOC; PetroChina; Vietnam’s Petrolimex; Middle East Oil Refinery, or MIDOR of Egypt, Philippines National Oil Company, or PNOC; Bumi Siak Pusako of Indonesia; and Unipec Singapore under term deals.

Bangladesh’s oil imports have been increasing steadily over the past several years as domestic demand grows, especially for oil-fired power plants.