Bangladesh expects to import first 0.05% sulfur gasoil through pipeline from neighboring India by the end of 2019 under an agreement to import a total 5 million of the fuel over a 15-year period till 2034, state-run Bangladesh Petroleum Corporation chairman Abu Hena Md Rahmatul Muneem told S&P Global Platts Monday.
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BPC and India's state-owned Numaligarh Refinery Ltd signed a sales and purchase agreement on October 22 in Dhaka in the presence of visiting Indian external affairs minister Sushma Swaraj, he said.
India's Bharat Petroleum Corporation Ltd. owns 61.65% stake of NRL, Oil India Ltd. owns 26% and the remaining 12.35% ownership is under the government of Assam state.
The SPA signing paved the way for the start of construction of the proposed 130 km pipeline to be named as the Indo-Bangla Friendship Pipeline, said the BPC official.
Oil product imports through this proposed pipeline would be a first for Bangladesh, as the South Asian country usually imports petroleum products in seaborne cargoes from different suppliers, the BPC chairman said.
Bangladesh's Cabinet Committee on Public Purchase had approved the signing of the SPA a couple of weeks back, he added.
Inking the SPA was a pre-condition set by India to provide grant worth Rupee 3.03 billion ($46.6 million) for the construction of the pipeline, of which 125 km is to be laid in Bangladesh, and 5 km in India, he added.
Bangladesh will build and operate the pipeline in its territory, while India will build and operate the pipeline in its territory. Gasoil will be supplied from NRL's 60,000 b/d Numaligarh refinery in northeast India's Assam state, while Bangladesh will receive the product at the Parbatipur petroleum oil depot in the northwestern district of Dinajpur.
The pipeline would touch Panchagarh, Nilphamari and Dinajpur in Bangladesh before reaching the Parbatipur oil storage tanks, he added.
BPC will pay a term premium of $5.50/b to the Mean of Platts Arab Gulf 0.05% sulfur gasoil assessments on a CFR basis to import the Indian gasoil for 15 years.
BPC will import around 250,000 mt/year of gasoil in the initial three years, and the volume will be raised to around 300,000 mt/year during the fourth to sixth years, 350,000 mt/year during the seventh to 10th years and 400,000 mt/year from the 11th to 15th years.
While the term premium for the pipeline gasoil is higher than current premiums of around $2.50/b to MOPAG 0.05% sulfur gasoil assessments on a CFR Chittagong basis that BPC is paying for seaborne imports, India's gasoil consignment would help BPC save transport costs in moving gasoil to the demand center around Parbatipur from Chittagong port, Muneem said.
Gasoil demand is around 1.10 million mt/year in 16 northern districts in Bangladesh, the BPC official said.
Separately, BPC in early this month started importing 0.05% sulfur gasoil from the Numaligarh refinery through railway under a separate new deal. BPC will import the gasoil in 10 consignments, each comprising around 2,300 mt, until December.
BPC earlier had imported a similar quantity of three gasoil consignments through railway from the Numaligarh refinery, at a premium of $7/b to MOPAG 0.05% sulfur gasoil assessments, CFR.
About a decade back, Bangladesh had imported 3,500 mt of gasoil briefly from BPCL in 2007. BPC had also imported around 400,000 mt of gasoil from Indian Oil Corporation during 2005-2006.