Runs out of storage space as demand for fuel plummets; country unlikely to get benefit of low oil price
Bangladesh Petroleum Corporation (BPC) is facing trouble as it can’t store imported fuel oil anymore. Its tanks are almost full as the demand for fuel in the country decreased by 60 percent due to the nationwide shutdown since March 26.
BPC secretary Kazi Mohammad Hasan told The Daily Star that with most factories and transportation being shut down for the past month, the demand for fuel oil had significantly dropped. As a result, BPC has been unable to sell off its stockpiles of oil.
To weather the crisis, the state-owned company is planning to store oil in its pipelines and rent private petroleum and power company tanks to store an additional amount of diesel.
BPC officials said that Bangladesh will not be able to take advantage of a historic slump in oil prices in the international market amid the global coronavirus pandemic due to the lack of storage capacity in the country.
BPC usually imports crude oil, namely Arab Light oil and Murban oil, from the Saudi Arabian Oil Company and the Abu Dhabi National Oil Company.
On April 23, the price of one barrel of Arab Light oil was $16.01 and that of Murban oil was $19.04. The price per barrel of crude oil of each has fallen 45 and 50 percent, respectively, in just one month.
As of April 22, BPC currently has reserves of around 9.41 lakh metric tonnes of fuel oil. Its storage capacity is 9.5 lakh metric tonnes.
Due to the limited storage capacity, around 1.2 lakh metric tonnes of diesel and 20,000 metric tonnes of crude oil are now stuck in five vessels at the outer anchorage of Chattogram port. Another import of 4.5 lakh tonnes of fuel oil is awaited next month.
According to BPC data, the ongoing shutdown due to the coronavirus outbreak has reduced fuel consumption by 60 percent in the country’s industry, agriculture, and transport sectors.
In April last year, an average of 13,000 tonnes of diesel were used per day; this figure has come down to 6,000 tonnes this month. The daily demand for jet fuel has come down to only 81 metric tonnes from 1,239 metric tonnes in April last year. The demand for other fuel — including petrol, octane, and kerosene — has also declined significantly, the data showed.
BPC buys 50 percent of oil through government-to-government agreements and the remaining 50 percent through open tenders. To meet the demand in the country, an average of five to six lakh metric tonnes of fuel oil is imported every month.
“Stocks have increased every day due to the declining demand for fuel oil. Dealing with the situation, an initiative has been taken to conserve these fuels at various privately-owned petroleum companies and power plants,” said Syed Mehdi Hasan, BPC’s director (management).
“The amount of oil that can be stored in these places is being checked. We have already held discussions with several petroleum companies. We hope this issue will be resolved soon,” he further told The Daily Star.
Mehdi added that around 65 to 70 percent of the country’s fuel oil demand is for diesel. At present, stored diesel amounts to around 5.32 lakh tonnes, against a capacity of 6.28 lakh tonnes. The four oil tankers, currently at the outer anchorage of Chattogram port, containing a further 1.2 lakh tonnes of diesel, would exceed capacity.
Around 45,000 tonnes of oil have also been stored for now in BPC’s oil tankers, normally used for transporting the fuel.
BPC officials said they have already sent a letter to eight major private companies requesting information on the number of tanks and their capacity, the receiving points and rent of the tanks, and rates of other associated costs. A BPC committee will make a report on their decision on the rates quoted by the companies and BPC will then sign mutual agreements with interested companies for storage till December this year.
While the oil remains unloaded from the five ships carrying diesel and crude oil stranded outside the port for more than a week now, BPC will have to pay an additional fine of around $10,000 per day.
According to Chattogram Customs House data, 6.79 lakh tonnes of diesel and 3.3 lakh tonnes of crude oil were imported by BPC between January and April 23 this year. During the same period last year, 10.71 lakh tonnes and 3.69 lakh tonnes were imported respectively.
