Thousands of tons of imported oil, arriving in the sea port city of Chottogram, is facing serious storage crisis. Such a situation has forced the authorities to seek private oil storages to preserve the oil now said to be available at rock-bottom prices. According to sources, Bangladesh Petroleum Corporation or BPC is struggling to store its regular imported oil whereas other countries of the world are stockpiling oil at falling prices due to the coronavirus pandemic.
Consumption of fuel in the country is less than half now due to the ongoing lockdown. But Bangladesh has also placed an order in January last to import oil till next June. “The country has a daily demand of 15,000 tons of diesel. At present, the average use is 7,000 tons. It means we face a problem with storage of the regular imported oil,” said Sayed Mehdi Hasan, Director, Planning and Operation of BPC. He said, “As per our purchase policy, we are in agreement with dealers to import oil till next June-July. We are now facing storage crisis as the imported oil would soon be surplus considering the current consumption rate.”
“At present, four ocean-going tankers are waiting to unload oil in deep sea territory of Bay of Bengal. By May, about ten more ships are expected to bring oil of regular import. Due to these reasons, we will not be able to take the opportunity to import extra oil at low prices. Not only that, If the waiting time of the ships is prolonged, BPC will have to pay a hefty fine.” He added.
So, Bangladesh, the world’s 77th largest oil consumer cannot plan to increase its extra strategic petroleum reserves in the coming months. The Country’s combined storage capacity of 1.3 million MT in its oil establishment in Chttogram is just about full. The total oil reserves capacity is less than one fourth even a single year of oil consumption of 6 million tons, making Bangladesh highly dependent on monthly basic oil imports in order to fulfill its consumption levels.
Bangladesh mainly imports oil from Saudi Arabia and the United Arab Emirates. These are imported on a year-to-year basis with the respective companies of relevant countries. Basically, the price has to be paid based on the price of the day of the world market on which the oil will be shipped.
“According to the existing agreement, before the coronavirus epidemic, oil had to be collected at US$ 36 per barrel. But as prices plummet, the price of oil that was shipped in March and April stands at US$ 16 a barrel,” said Sayed Mehedi Hasan. He said that it is also not possible to keep fuel oil in stock for more than the stipulated time, which is why there are no plans to increase the stock due to shortages of space.
The sale of diesel have dropped by more than 53 percent every day. In all, BPC's fuel sales fell by 60 percent. In such a situation BPC is exploring the possibility of using the reserves of several private sector entities to regularly store imported fuel oil. So far, the infrastructure to store 60,000 tons of fuel oil in a company is being verified. Also, some other companies have fuel oil storage capacity, but safety and security measures of those companies are not adequate, BPC source said.
Oil storage is about the only thing in demand in the world crude market right now. The coronavirus pandemic has obliterated consumption and forced producers and traders to store more oil on the water as land-based facilities near tank tops. While Bangladesh is also filled its cavern with crude and other petroleum products, the lack of space means it’s also an opportunity lost.
Bangladesh is refining 15 lakh MT crude oil in its only refinery at the Eastern Refinery Limited ERL, a BPC subsidiary. It also has the capacity to stock only 185,000 MT of crude oil. Aktarul Haq, Managing Director of ERL said, “We never thought of facing such crisis; our storage capacity is almost full now. Since the general holiday for coronavirus outbreak starts diesel supply is decreasing significantly.”