The newly constructed, 131.57 kilometre Bangladesh-India Friendship Pipeline for transporting diesel or petroleum is ready for inauguration and will significantly contribute to the nation’s energy security.
Bangladesh is set to begin importing fuel oil from India this month, with the much-awaited inauguration of the India-Bangladesh Friendship Pipeline. The cross-border pipeline, spanning a distance of 131.57 kilometres, will be officially launched on March 18, 2023, through a virtual ceremony attended by Bangladeshi Prime Minister Sheikh Hasina and Indian Prime Minister Narendra Modi.
The opening of the pipeline marks a significant milestone in the bilateral relations between the two neighbouring countries, with the project being hailed as a symbol of cooperation and friendship. The pipeline will allow Bangladesh to import fuel oil directly from India, reducing transportation costs and increasing energy security. The “Indo-Bangla Friendship Pipeline” spans 126.57 km in Bangladesh and 5 km in India. The Bangladesh Petroleum Company (BPC), the sole state-owned fuel oil importer, plans to import 2-3 lakh metric tons annually through the pipeline.
Present oil import scenario
To meet the annual consumption, Bangladesh needs to import 6.6 to 7.7 million metric tons of petroleum each year. Presently, sixteen northern districts receive fuel from the oil storage at Parbatipur, which is generally supplied by the Khulna-Baghabari train route. Trains have been used to transport oil from India, and in recent months, Bangladesh has been importing 22,000 metric tons of diesel each month. The BPC encounters many difficulties while transporting fuel from Chattogram to Dinajpur via roads and railroads, particularly when natural disasters and political conflicts occur.
Bangladesh Petroleum Company (BPC) sources have revealed that the transportation of oil tankers from Chattogram to the northern region via waterways takes approximately 48 hours. Although rail lines are faster than waterways, BPC cannot use the full capacity of its train carriages due to the deteriorating railway tracks in the eastern region. Consequently, BPC has to first transport oil from Chattogram to Mongla port before it can supply the required quantity to the northern region. From there, a broad-gauge rail line is used to transport the oil to Parbatipur.
How can ‘Indo-Bangla Friendship Pipeline’ subside the issues?
The 131-km-long oil pipeline will transport fuel from the Assam Numaligarh Refinery Ltd (NRL) marketing terminal in Siliguri, West Bengal to the BPC depot in Dinajpur’s Parbatipur. Md Tipu Sultan, general manager of Meghna Petroleum Ltd (a distribution wing of the BPC and the project’s implementing agency), stated that the direct cross-border pipeline will transport fuel oil to Parbatipur without any of the current obstacles. Using this pipeline, approximately one million metric tons of diesel can be imported annually from India. But, as said previously, two to three lakh tons will be imported during the initial phase. The BPC has been implementing the project in accordance with a 15-year agreement with India to import between 250,000 and 400,000 tons of diesel yearly from the neighbouring nation via the cross-border pipeline. Bangladesh will operate its section of the pipeline, while India will operate its portion.
The “Sales and Purchase Agreement” with timeline
Authorities stated that Dhaka was required to sign a ‘Sales & Purchase Agreement’ (SPA) prior to receiving New Delhi’s financial support. According to the documents, the ‘premium’ or transportation cost of petroleum was set at $5.5 per barrel of diesel, and the price of petroleum will be determined by the price on the international oil market. The documents also suggest that Bangladesh would import annually 2.5 lakh metric tons for the first three years, 3 lakh metric tons for the fourth to sixth years, 3.5 metric tons for the seventh to tenth years, and 4 lakh metric tons for the eleventh to fifteenth years.
Costs will be reduced
According to BPC sources, the cost of importing and supplying a single barrel of oil is approximately $8 at now. Shipping oil from the Middle East to Chattogram port’s outer anchorage and onward to Dinajpur is included in the total price.
ABM Azad, chairman of BPC, stated that Bangladesh would receive numerous benefits from such a pipeline and the agreement could be extended for an extended period of time. He said, “the premium is cheaper ($ 5.5) compared with import cost from overseas as Bangladesh has to spend $12 per barrel as premium to import diesel.” He added that such petroleum imports from India via cross-border pipelines will assist develop a petroleum stockpile in the northern region to fulfil the region’s increasing demand.
Furthermore, the cost of importing oil through the cross-border pipeline will decrease to $5.50 per barrel after the project is completed, according to BPC officials. While BPC imported 66 lakh tons of fuel oil in 2021–2022, Bangladesh Independent Power Producers brought another 42 lakh tons for use in power plants. Nasrul Hamid, the state minister for Electricity, Energy, and Mineral Resources, stated, “It [the pipeline] will be a milestone in providing quick and uninterrupted fuel supply to the northern region of the country in a cost-effective manner.”
In 2018, the foundation stone for the India-Bangladesh Friendship Pipeline was laid to supply fuel to 16 districts in the northern part of the country. The pipeline’s construction was scheduled to be completed by June 2023 with the budget of Tk306 crore.