Oil pipeline project to take off after 6-year delay

The cabinet committee on purchase yesterday approved the draft commercial contract with a Chinese firm to set up the Single Point Mooring with Double Pipeline in Chittagong at a cost of $550 million.

China Petroleum Pipeline Bureau will install the pipeline with Beijing's soft loan under a government-to-government deal.

This is among the 28 projects for which Beijing gave primary consent for soft financing during Chinese President Xi Jinping's visit to Dhaka last month.

After the signing of the commercial contracts, a loan agreement will be signed with China's Exim Bank, an official of the energy ministry said. The process of implementing the project will finally start after a delay of six years.

As per the Chinese soft loan policy, Beijing nominated the company without the bidding process. The cabinet committee has awarded it under the “Quick Increase in Supply of Power (Special Provision) Bill”.

Under the project, the single-point mooring installation will be built on Sonadia Island at deep sea, where large oil tankers will anchor.

As per the latest project design, a 36-inch pipeline will be built there to pump oil to a storage plant 32km away on the Matarbari Island in Maheshkhali. Earlier, the length was 16km.

There will be another 18-inch pipeline that will be 188km long, which was 94km long previously. One pipeline will pump crude oil and the other diesel.

At present, large tankers anchor at the deep sea and smaller ships unload and bring oil to state-run Eastern Refinery in Chittagong.

The process, called lightering, is an expensive and time-consuming operation. For instance, it takes 11 days to unload 1 lakh tonnes of oil.

Apart from waste of time and increase in cost, a lot of oil is systematically stolen during the process.

But if a pipeline is installed it will take just two days to empty a vessel carrying such a volume of oil. This would cut cost and stop pilferage, said the energy ministry official.

The pipeline will save the government Tk 1,000 crore a year, and the project cost would be recovered in five to six years, according to the energy ministry's estimate.

Jeddah-based Islamic Development Bank was initially supposed to finance the project but as the cost shot up it withdrew. Later, China expressed its interest to bankroll the project and nominated China Petroleum Pipeline Bureau for the job.