DocDmntOf The WorldBank
FOR OFFICIALUSE ONLY C A. /> Public Disclosure Authorized
Report No. 6059-lD
STAFF APPRAISAL REPORT Public Disclosure Authorized BANGLADESH
REFINERY MODIFICATION AND LPG RECOVERYAND DISTRIBUTION PROJECT
November 11, 1986 Public Disclosure Authorized
Public Disclosure Authorized Energy Department Petroleum Projects, Division I
This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS
Currency Unit = Taka (Tk) US$1.00 = Tk 31.00 Tk 1.00 = US$0.0323
WEIGHTS AND MEASURES
1 barrel (bbl) 0.159 cubic meters (03) l cubic foot (CF) = 0.028 m
I British Thermal Unit (Btu) - 0.252 kilocalories (Kc) I metric ton (mT) of oil 0.85 sp.gr. = 7.4 bbl
I kilometer (km) - 0.621 miles
MCF - thousand standard cubic feet MMCFD = million standard cubic feet per day BCF = billion cubic feet
TCF - trillion (1,000 billion) cubic feet toe - tons of oil equivalent in heating value kgoe = kilogram of oil equivalent in heating value mw megawatt (1,000 kilowatts) MMtoe = million tons of oil equivalent
ABBREVIATIONS AND ACRONYMS
BOC Burmah Oil Company BOGMC Bangladesh Oil, Gas and Minerals Corporation BPC Bangladesh Petroleum Corporation BPDB Bangladesh Power Development Board CIDA Canadian International Development Agency CNG Compressed Natural Gas ERL Eastern Refinery Limited GOB Government of Bangladesh ICB International Competitive Bidding IDA International Development Associacion IFC International Finance Corporation IoC International Oil Company LNG Liquefied Natural Gas LPG Liquefied Petroleum Gas LP Gas LP Gas Limited LRMC Long-run Marginal Cost MHC Mild Hydrocracker NGL Natural Gas Liquid PIU Project Implementation Unit p.a. per annum UNDP United Nations Development Programme
FISCAL YEAR
July 1 to June 30 FOROMCIAL USE ONLY
Bangladesh Refinery Modificationand LPG Recovery and DistributionPrr ^ct DevelopmentCredit and Project Summary
Borrower: People's Republic of Bangladesh
Beneficiaries: Eastern Refinery Limited (ERL) and LP Gas Limited (LP Gas), which are subsidiariesof BangladeshPetroleum Corporation (BPC), and BangladeshOil, Gas and Minerals Corporation (BOGMC),
Amount: US$47.00 million
Terms: Standard
On-Lending Terms: The Governmentwould onlend at an interest rate of 11*5% per annum and on repayment terms of 15 years including4 years grace, US$35.5 million of the proceeds of the Credit to ERL for the refinery modificationcomponent; US$4.6 million to BOGMC for the LPG recovery component;and US$5.8 million to LP Gas Limited for the LPG storage and distributioncomponent. ERL, 9OGMC and LP Gas Limited would bear the foreign exchange risk. US$1.1 million will be applied to finance GOB'equity share in a privately- operated LPG distributioncompany to be establisbed.
Projiect Description: The project provides assistanceto minimize the cost of petroleum imports to the country by rationalizingthe supply of petroleum products and promoting the substitute use of LPG for kerosene. To achieve these objectives,the project includes: (i) a modificationof the refinery to enhance its flexibilityto better match its productionto the domestic demand for petroleumproducts, thereby reducing the cost of meeting these requirements;and (ii) LPG recovery, storage,distribution and marketing facilitiesfor some 11,000 mTpa of LPG.
Risks: The technical,financial and commercialrisks involved in each componentare minimal. The expected economic rate of return from the refinery modificationproject is 21%, based on a margin of $35 increasingto $40 per mT between diesel and fuel oil, a margin below the historicaland prevailing $45 to $50 per mT. At prevailingmargins, the ERR is about 40%. With regard to the LPG component,the LPG market is large and will displace mainly importedkerosene and firewood. The risks of the benefits being eroded to a level to make the project uneconomicare small, as foreign exchange savings are significantwhen LPG displaces kerosene. The non-quantifiablebenefits of reduced deforestationwhen LPG substitutesfor firewood would also be important.
Thisdocument has a restricteddistribution and maybe usedby recipientsonly in the performanee of theirofficial duties. Its contentsmay not otherwise be disclosedwithout World Bank authorization. ii -
Estimated Project Cost
Povei Local a/ Total ----- US$ ilo -
I. Refinery Modification (1) Refinery Moc.ificationand Operations Assistance 21.1 6.4 28.1 (2) Project Management Assistance 1.0 0.1 1.1 (3) Training and Technical Assistance 0.5 0.1 0.6 (4) Spare Parts 3.2 0.8 4.0
Sub-total 26.4 7.4 33.8
II. LPG Recovery FaCiliLies LPG Recovery Facilities at Kailashtila 3.5 0.7 4.2
Sub-total 305 0.7 4.2
III LPG Storage and Distribution (1) LPG Bottling Plants 0.6 0.2 0.8 (2) LPG Bottles 3.0 0.6 3.6 (3) LPG Transport (Trucks and Barges) 3.0 0.8 3.8 (4) LPG Retail Filling Units 0.2 0.2 0.4 (5) ImplementationAssistance/Training 0.5 0.2 0.7 (6) InfrastructureFacilities/Port/Land 103 1.3 2.6
Sub-total 8.6 3.3 11.9
Base Cost Estimate (Total.of I, II & III) 38.5 11.4 49.9 Physical Contingencies 3.9 1.1 5.0 Price Contingencies 10.1 3.8 13.9
Total Cost 52.5 16.3 68.8
Iaterest during Construction - 12.5 12.5
Total Financing Required 52.5 28.8 81.3
a/ Local costs include USS8.2 million of customs duties. - Lii -
Fincin Plan
Foreigl Local Totel (lS$ million)…--
IDA 4 59 1G1 47.0 Government of 8anggadeslh 19.5 19.5 Internal Cash Cene^atioin- 7.3 7.3 Private Investors 6.6 0.9 7.5
52.5 28.8 81.3
Estimated Disbursements (US$ million)
(IDA Fiscal Year) 1987 1988 [989 1990 1991 1992 1993
Annual 5.5 ?.6 I il~o 3.6 1.8 0.3 Cumulative 5.5 13.1 30.3 41e3 44.9 46.7 47.0
Economic Rate of Return
(i) Refinery Modification PLuject Component 21% (ii) LPG Early Recovery Priject Component (Kailashtila) 17% (iii) LPG Distribution Project Cowponeat (Westecn Zone) 15% BANGLADESH
REFINERY MODIFICATIONAND LPC RECOVERY AND DISTRIBUTIONPROJECT
Table of Contents
Page No.
IIs ITHE DENE ION SECTO...... 0 *00000.000*OO S . II. THEEB.CROmmErCTI O...... E.e...... * ...... A. BetkgroundmProduts.Sbseco...... , .2 B. Commercial Energy Asalanceoo ...... C.'ResourceEdwet...... ¢&*o**X^v**¢***** D. Sector Planning**...... Oe6z5 E. Petroleum Products Subsector *...... o...... #.9*. 5 1. Consumptionand Supply of Petroleum Products ...... 5 2. PetroleumProducts Demand Forecast and Balance.o...... ,....6 3. Refinery Investment Strategy...... 6
F. LPG Consumption and Supply...... *...... a7.0 G. Pricing.** ...0 ...... 8 1. Natural Gas ...... 8 2. PetroleumProducts.*...... to ...... 9 3. LPG9...... 10 H. IDA's Role and Lending Strategy in the Petroleum Sector...... lO
III. THE BENEFICIARIES...... **so** ...... ll ...... A. Bangladesh PetroleumCorporation (BPC) ...... ll B. Eastern Refinery Limited (ERL)...... *.12 C. LP Gas Limited ...... 0...... 12 D.OGM ...... o .** *...... I E. Accounts and Audits ...... 13
IV. THE PROJECT ...... 14 AL.Project Objectivesand Scope...... 14 B. Project Rationale*...... &s...... so...... 14 C. Project Description and Implementation..*...... oo 15 1. Refinery ModificationComponent...... 15 2. Early LPG Recovery,Storage and Distribution..*...... l7 D. Project Preparation Status ...... 000000000 000 0000000000000.18
E. Capital Cost Estimates...... 0 l9 F. Financing Plan ...... e * Go Procurement ..e..**.***.o*...... 2
H. Disbursements ...... 0000000000000000000000000002 I. Monitoring and Reporting.** ..o009...... 23 J. Ecology and Safety...... *...... 23 K. Insurance......
This report is based on the findings of a mission that visited Bangladesh in October 1985 and was prepared by Messrs. L. Wijetilleke,J.P. Pinard, F. Manibog, P.T. Venugopaland A.C.W. Vonck. Page No.
V, FINANCIAL ANALYSTS...... 4 0f...... o...0 44.... 0.9.24 A. Refinery Modificationi Component:...... o4o,..24 14 ERL's Past F'inancial Perfornmaice.... 9.o ....e *-...e 24 2, Remuneration of FRRL.OO.. - ...... 3. Financiat P.o..t..i.. *.....0* ... *e .25 B. Early LPG Recovery Comipoutentt (BoaCtr4C..t...... o..27 C. LPC Storage and i.sLributiOil Corioip*nt- (I'P Gas Limited) ..... 27
VI. ECONOMIC E.VAL.UATION e * 0e0 4.e**c* * *00 0 -..... 28 A. Introduction - Past Trt'nds. Dr 4 *...... o ...... 9 ...... o28 B. Crude Oil and rdndtuitPrice Asscumptions .... v....0...... 4 ,*29 C. Refinery Operations ...... 1. Refinery ModificaLion Contponent..4 ...... *30 2. RetiileryAs hk OO^.e ...... eo*.ee #.Dev 4*e30.. D. LPG Recovery, Storage and Distribution e.e4...... 3 1. KailashtilaLPG Component- - ...... 31 2. WesLernZofie LPC Campon2ent-- ...... , ...... o*#32 E. Project Risks0...... 9. . . 00. 4 0...... 0...... o.....32 1. Refinery Modification..... 0 ...... o 32 2. LPC Recovery, Stor.-geand nistribution ...... 0...... 32
VII. AGREEMENTS0...... 4...... 40.....0.400 .04.40...... 0...... 0 0 33
ANNEXES
2-1 Sectoral Shares in Petroleum Products Consumption 2-2 Consumption of Petroleum Products, 1976-1984 2-3 Petroleum Products Demand Projections 2-4 Sector-wise Consumption of Kerosene, 9iesel and Fuel Oil, 1984/85 2-5 Review of BPC PetroleLum ProdueLs Supply Strategy 2-6 Summary of Consultanris Study anfi an Assessment of Future Crude Oil and Product Pricic!g 3-1 BPC Subsidiaries 4-1 Estimated Sched.ule of Dishturrpment 5-1 Eastern Refinery Limited - 'inqnrcal Projections 5-2 BOGMC LPG Recovery Component - FinaiicialEvaluation 5-3 LPG Storage and Distribution Coumponent Financial Evaluation 6-1 Economic Analysis - ERL Refinery Modification Component 6-2 Economic Analysis - ERL Refinery As A WShole 6-3 Graph - Crude and Product Price Variations at Singapore (1976-1984) 6-4 Graph - Crude and Product Price Variations at Singapore (1987-2000) - Base Case 6-5 Graph - Crude and Product Price Vari2tiors at Singapore (1987-2000) - Lower CrtudeOil Price Scenario 6-6 Economic Analysis Kailashtila Component 6-7 Ecotiomic AnalyEis We stern½nne Componenr CHARTS
1. Energy Sector Organization 2. Implementation Schedule
MAP
IBRD No. 19490R (Location of ERL, Kailashtila LPG Recovery Facilities and Baghabari and Khulna LPG Storage and Distribution Terminals'
** * * ** **' *f** *
DOCUMENTSAVAILABLE IN THE PROJECT FILE
A. Techno-Economic Feasibility Study by Lummus Crest Engineering, Inc.
Volume 1 - Executive Summary Volume 2 - Demand/Supply Volume 3 - Review of ERL Volume 4 - Alternative Processing Configuration Volume 5 - Optimization Studies Volume unnumbered - Addendum to above.
B. Memorandum of Association of ERL C. ERL Annual Accounts 1982/83 and 1983/84 D. BPC Annual Accounts 1982/83 and 1983/84 I. INTRODUCTION
1.01 The Government of Bangladesh (GOB) has requestedan IDA Credit of US$47 million to assist in financingan integratedpackage of investmentsand consulting services to modify the country's sole refinery located at Cbittagong, recover LPG from natural gas and promote its use mainly as a substitute for firewood and kerosene. The project is aimed at reducing the cost of imported crude oil and petroleum products,which in FY84 claimed about US$450 million or 60% of the country's total export earnings.
1.02 The project consists of two main components: (a) modificationof the Eastern Refinery Limited (FRL) in Chittagong,to increase the yield of premium value kerosene and diesel, which would otherwisebe imported,by conversion of surplus fuel oil which is currently cxported at depressed prices. This componentincludes project management assistance,training, and spare parts and materials for preventivemaintenance; and (b) LPG recovery, storage and distributionfacilities, which includemodifications to existing gas treatment facilitiesat the Kailashtilagas field to recover about 5,000 metric tons per annum (mTpa) and 2,000 addit-onal mTpa of condensate;an important contributionof this component is the establishmentof an organizational structurefor the marketing of LPG featuringboth public and private entities operating in parallel, which could be progressivelyexpanded to handle larger quantitiesof LPG in the future. The implementationof these components is expected to be completed by FY92.
1.03 Total financingrequirements for the project, includingphysical and price contingenciesand interest during construction,are estimated at US$81.3 million, of which US$52.5 million are in foreign exchange. The IDA Credit will be made to GOB on standard IDA terms. GOB will on-tend US$45.9 million to ERL, BOGMC and LP Gas Limited at an interest rate of 11.51 per annum (p.a.) and on repayment terms of 15 years includingfour years of grace. The foreign exchange risk will be borne by the companies. US$1.1 million will be applied againsta Governmentminority share in a privatelyoperated LPG distribution company to be established.
1.04 The modificationof the refinery resulted from the on-going Energy Efficiencyand Refinery RehabilitationProject (Credit1357-BD) under which a detailed techno-economicstudy was conductedby consultants(C.E. Lummus of the USA) to compare the various options available to Bangladesh to reduce the cost of petroleum supply, includingclosing down the refinery. The consultantsconcluded that this objectivecould best be achieved by improving the use of existing facilities,thereby minimizing the need for costly capital investmentswhich had been consideredpreviously.
1.05 The project, which should significantlyreduce foreign exchange outlays, has been accorded a high priority by the Government. The economic rate of return on the refinery modificationcomponent is estimated at 21% p.a., that of the LPG recovery and distributioncomponent at Kailashtilaat 17Z, and that of the LPG storage and distributioncomponent (Western Zone) at 15%. The project was appraised in October 1985 by Messrs. L. Wijetilleke, J.P. Pinard, F. Manibog, P.T. Venugopal and A.C.W. Vonck of the Energy Department. -2-
II. THE ENERGY SECTOR 1/ A. Background
2.01 Per capitaenergy consumption in Bangladeshis among the lowestin the world, It is estimatedat about90 kilogramsof oil equivalent(kgoe) per year,of whichabout 402 is accountedfor by cormercialenergy and the rest by non-commercialsources such as fuelwood,crop residuesand animalwastes. Per capitacommercial energy consumption, estimated at only 36 kgoe, is aboutone- sixteenthof the correspondingworld average and one-tenthof the averagefor low-incomecountries. Otherwise poorly endowed in primaryenergy, Bangladesh has an abundantpotential supply of naturalgas. Althoughtraditional biomass energyforms are expectedto remainthe predominantenergy source particularly in rural areas,the accelerateddevelopment of the gas sectorhas led to a rapidgrowth in co mrcial energyutilization and a progressivedecline in the shareof commercialenergy derived from liquidhydrocarbons. Natural gas now accountsfor 522 of totalcouercial primaryenergy. Despitethis development,petroleum product imports continue to make disproportionate claimson the country'slimited foreign exchange resources. This is due primarilyto the almostLzclusive dependence on petroleumproducts of the transportand agriculturesectors, which accountfor 472 of totaloroducts demand,and for whichopportunities for gas substitutionare limited. In FY84, totalprimary coumercial energy supply (gross of conversionlosses) amountedto 3.9 NHtoe (milliontons of oil equivalent),of whichnet oil importscontributed 1.4 HNtoe (at a cost of about US$450million), claiming about602 of the country'stotal export earnings. In addition,there is a wideningimbalance between the patternsof domesticpetroleum product consumptionand refineryoutput, which has led to a steadyincrease in the volumeof middledistillate imports while surplus fuel oil had to be exported at a loss.
2.02 There is a largepotential for expandedcommercial energy use to supporteconomic development. Natural gas is the obviousresource to fill this gap sinceit can provideboth fuel and feedstockecosomically. Indeed, subjectto confirmationof potentialreserves and well productivity,natural gas offersan unparalleleddevelopment opportunity by makingthe establishment of a reliable,comparatively low cost energybase a feasibleobjective within the country'ssevere resource constraints. The Governmentof Bangladesh(GOB) has accordinglyfocussed its energypolicy on the reductionof the economy's dependenceon oil importsby acceleratingthe developmentof domesticgas resourcesand incresing the economy'sabsorptive capacity for gas. 2.03 There are, however,geographical (all knowngas fieldsare east ok the Jamunariver) as well as technologicaland economicfactors (particularly in the westernzone, and in the transportand agriculturesectors) that limit the substitutionof liquidfuels by naturalgas. Hence,sizeable imports of petroleumproducts in additionto importsof crudeprocessed in the refinery
1/ A more detaileddescription and analysisof the sectoris containedin the reportentitled "Bangladesh: Issues and Optionsin the EnergySector" (October 1982,Report go. 3873-BD),which is part of a seriesof reportsof the Joint UNDP/WorldBank Energy Sector Assessment Program. -3-
are expected to continue. Accordingly,GOB is attempting to intensifythe search for oil, whieh has proved unsuccessfulso far and is currently at a very low level. The oil companies that entered into productionsharing contracts in the late 1970s for offshore explorationhave all relinquished their concessionsand BangladeshShell Oil Company is the only remaining active foreign company exploring in Bangladesh. In an effort to attract mote companies to explore in Bangladesh,GOB has undertaken,partly with IDA assistance,a program of seismic surveys and geological studies which would form the basis of a promtion effort to attract participationby international oil companies. On the downstream side, GOB is also undertakingwith IDA assistance the rehabilitationof the country's sole refinery at Chittagongand the preparationof an industrialenergy conservationprogram.
B. CommercialEnerg Balance
2.04 Commercial sources of primary energy in Bangladesh are hydropower, natural gas, imported oil and coal. The table below estimates Bangladesh's energy balance in terms of oil equivalent:
ronarcialEnergy Balance - 1983/84 ('000toe)
SUPPLY DEMAND
Domestic ResIdential/CommercIaf 747 (22%)
Natural Gas 2,009 PiydroPower 281 lodustriala/ 1,103 (32%)
EnergyImports
Petroleum(net) 1,405 Transport 506 (15%) Coal 177
TotalPrimary Suppiy 3,872 Agriculture 901 (27S) (ofwhich fertilizer) (754) (22%) Less:Conversion and TransmissionLosses 475 Others 140 ( 4%)
TotalNet EnergySupply 3,397 TotalDemand 3,397 (100%)
a/ Excludinggas usedas fertilizerfeedstock.
Sources:Bangladesh ofl, Gas and MIneralsCorporation (formerly Petrobangla), Bangladesh PetrolewuCorporation, Enstern Riefinery Limited, Bangladesh Power Develogmsnt B0ard and BangladeshBank. -4-
C. Resource Endowment
2.05 Natural gas and a limitedhydropower potential are the only two domestically available commercial primary energy sources. Mining of coal and peat deposits is presentlynot consideredeconomic. More critically, Bangladeshhas no known oil reservesand has to meet all its liquid hydrocarbonrequirements through imports.
2.06 Past explorationefforts have led to the discovery of substantial reserves of natural gas. Thirteen gas fields--:welveonshore and one offshore--havebeen discovered,all located east of the Jamuna River which divides the country from north to south into eastern and western zones. Total gas reserves are currentlyestimated at about 11 trillion standard cubic feet (TCF), of which 75% are expected to be recoverable. Gas output has increased steadilyover the last decade, growing at an average of 14% p.a. from 29 billion cubic feet (BCF) in 1975/76 to 81 BCP in 1983/84 (2.0 MMtoe). The bulk of gas consumptionis in power generationand fertilizerproduction, while other industrial,commercial and domestic uses are expanding steadily.
2.07 Two of the world's largestrivers, the Ganges and the Brahmaputra, flow through Bangladesh. The flat t3rrain, however, makes the potential for hydroelectricpower limited. The hydropowerpotential that can be economicallyharnessed at Kaptai in the ChittagongHill Tracts has been evaluatedat 340 MW, of which 130 MW has been developed. Elsewhere,the northern portion of the Brahmaputrariver offers an estimated capacity of 400 MW but the remote location and high developmentcosts make the constructionof a dam at this site a remote possibility.
2.08 About 60% of the total energy used in Bangladeshcontinues to be met from traditionalbiomass sources such as crop residues,animal wastes, straw, rice husks, jute sticks and firewood.1/ Overall, binmass energy use is estimatedat 5 MMtoe annually. While the relative share of biomass fuels within the overall energy balance is expected to graduallydecline, Bangladesh does not have the resourcesto sustaina major shift to commercialenergy, and demand for traditional sources is likely to keep pace with population gro-h. The rapid depletion of the country's forest resourceshas become a critical issue. Fuelwood resourcesare being overexploitedto meet increasing demand,and alarming increases in fuelwood prices and the commercializationof jute residues portend a crisis situation,particularly in North Bengal. Foreignassistance has recently started to support forestry studies and communityforestry projects. Further support to acceleraterural afforestationis essential. In addition,concerted efforts are required to upgrade end-use efficiencyof traditionalenergy through the introductionof improved cooking stoves or wood-burningdevices.
I/ A more detailed discussionof the rural energy subsectoris provided in a report entitled "Bangladesh: Rural and Renewable Energy Issues and Prospects" (EnergyDepartment Note No. 5, April 1982). -5-
D. Sector Planning
2.09 The energy assessment prepared in 1982 under the Joint World Bank/(NDP Energy Assessment Program identifiedmajor weaknesses in energy sector planning and management. Recognizing the need to improve sector planning and establisha central planning body, GOB has recently taken major steps to strengthen its energy policy making capabilities. COB is in the process of drafting a five-yearplan (FY85-89)which is expected to continue giving high priority to the energy sector in the allocationof investment resources. Over the last two years, an Energy Study and Planning Cell (ESPC) was establishedwithin the Planning Commissionwith the objective of upgrading the capabilityfor energy planning within the Planning Commission. This cell has been supportedby a UNDP/ADiBfunded technicalassistance project, the Energy Planning Project (EPP), which was completed in mid-1985. GOB has also commissioneda Power System Master Plan to guide future investment in the power sector. Finally, the IDA-financedRnergy Efficiencyand Refinery RetabilitationProject has assisted COOBin preparing a program of industrial energy conservatioameasures, and developing an optimum petroleum products supply strategy. The effects of these recent actions on improvingsector planning will need to be closely monitored in the next few years.
E. Petroleum Products Subsector
1. Consumptionand Supply of Petroleum Products
2.10 Despite the increasedutilization of natural gas in almost all the sectors of the economy, petroleumproducts still account for 36% of total commercial energy consumption. About 37% of the total consumptionof petroleum products is in the transport sector, followed by domestic usage (20%, mainly for cooking and lighting),power generation (19%) and the industrialsector (14%) (Annex 2-1). The pattern of consumptionof petroleum products in Bangladeshhas changed noticeably since the mid-seventies(Annex 2-2). Increased use of natural gas has dampened demand for lighter petroleum products (naphtha)as well as for heavier residual fuel oil.
HistoricaI Consumptionof Petroleum Products, 1975-1984 (in thousand metric tons) Average Annual Growth Rate 1975 1980 1984 1975-80 1980-84
LPG - - 2.7 0.2 6.9 0.5 - 26.4 Gasol ine 58.8 5.4 62.0 4.4 557. 3.8 1.1 -2,6 Jet Fuel 23.8 2.2 44.4 3.1 64.0 4.4 13.3 9.6 Kerosene 340.9 31.4 384.0 27.2 351.4 24.2 2.4 -2.2 Diesel Oil 278.8 25.7 447.2 31.7 615,8 42.4 9.9 8.3 Fuel Oil 383.4 35.3 470,7 33,4 359,5 24,7 4.2 -6.5
Total 1,085.7 100.0 1,411.0 100.0 1,453.3 100.0 5.4 0.7
Source: BangladeshPetroleum Corporation - 6
2.11 Consumption increasedat an average annual rate of 5.42 from 1975 to 1980, diesel oil registeringa growth of 9.91 and fuel oil 4.2X per annum. However, between 1980 and 1984 while diesel oil consumptioncontinued to increase at 8.3Z per annum, fuel oil demand declined by 6.51 per annum, due to its displacementby natural gas. During this same period, the share of middle distillates#comprising of jet fuel, kerosene and diesel oil, increased from 621 to 71Z while the demand for fuel oil declined from 331 to 25X.
2. PetroleumProducts Demand Forecast and Balance
2.12 The future rate of growth in energy use will depend in part on the pace of investmentin the economy, the level and compositionof foreign aid to Bangladesh,and on such outside events as changes in world oil prices, or the productionand relative prices of jute goods, the country*smost important export commodity. The uncertaintiessurrounding these factors make long-term projectionsof energy consumptionsubject to wide margins of error. The consultantsappointed to design the proposed refinerymodification project prepared demand forecastsfor petroleumproducts based on three alternative growth scenarios (Annex 2-3): a no growth per capita petroleum consumption,a low growth scenario (5.3% p.a.) in petroleum consumptionderived from historical demand over the past five years, and a high growth scenario (7.8X p.a.) developed from a predicted 5.5% p.a. growth in commercial energy. Under these scenarios,demand for middle distillates is projected to grow at annual rates ranging from 21 to 9% p.a. This is expected to reinforcethe domination of middle distillateswhose share would grow to between 751 and 85X of total product demand by 1995.
2.13 In FY84, Bangladesh imported some 400,000 mT of middle distillates (diesel and kerosene) and exported 95,000 mT of naphtha, bearing the cost of transportto and from Singaporeon both export and import. The surplus of naphtha is unavoidableand will continue to increase,especially as additional quantitiesof condensate,about two-thirdsof which are direct gasoline blending components,-re recoveredfrom natural gas. Fuel oil export (in a currentlydepressed mLrket) has so far been largely avoided by reducing the refinery throughput. This, however,,will become increasinglydifficult as more natural gas is utilized in place of fuel oil in the power and industrial sectors. This will force the export of fuel oil at depressed prices, unless suitable modificationsare brought to the refinery to better tailor its operatingcapability to the consumptionpattern. Because of the supply constraintsdescribed above, the rapid growth in diesel consumptionis a key source of concern for GOB. Diesel products are used mainly in the transport and agriculturesectors, 38' in road transportalone (Annex 2-4). Diesel use for irrigationand for road transporthave grown equally rapidly over the last ten years at about 11% p.a.
3, Refinery InvestmentStrategy
2.14 Bangladeshhas no known petroleumreserves and meets its petroleum product requirementsentirely through imports. Petroleumproducts are obtained from three differentsources: (i) domestic refining of imported crude oill (ii) purchasesof petroleumproducts mostly under short-termcontracts; and (iii) product importsunder barter arrangementswith the Soviet Union. Responsibilityfor importingand refining crude oil, marketing refined products,and importingdeficit petroleum products is assigned to the BangladeshPetroleum Corporation (BPC) which has been managing the country's petroleum supply competently(Annex 2-5). The country'sonly refinery, the Eastern Refinery Limited (ERL) at Chittagong,is a fully owned subsidiaryof BPC. The refinery facilitiesconsist of a 1.5 mTpa crude oil distillation unit, a platformerto convert low octane value naphtha to high octane gasoline, a gas oil hydro-desulfurizerto remove sulfur, and a recently added asphalt plant. The crude distillationunit is capable of separatingcrude oil into fractions conformingto the boiling ranges of different petroleum products, while the other downstreamfacilities can only improve the quality of these products. The refinery'sproduction pattern is therefore limited to that generated by the type of crude oil being processed.
2.15 In 1982, the Covernment sought IDA assistance to examine the various options available to minimize the cost of meeting the country's petroleum product requirements. Several options were evaluated including the possibilityof mothballingthe refinery and importingall products. Offshore processingin Singaporeof crude oil procured by GOB-an option which BPC/ERL had been pursuing for some time and abandonedas uneconomic--wasalso evaluated. Evaluationof these issues and options called for an assessmentof future crude oil and product prices over the medium and long-term,the related influenceof new refining facilitiesin OPEC and existing refineriesin Singapore,and the relative availabilityof different types of crude oils. These aspects, together with the results of the evaluationof the various supply alternativesavailable, are in Annex 2-6.
2.16 Given the uncertainoutlook for future crude oil and product prices, COB in consultationwith the Bank opted for the lower capital cost, and lower risk, option described in Chapter IV (pars 4.04). With this investment, surplus fuel oil will be converted to premium value diesel oil, while eliminatingthe downgradingof diesel oil to low value fuel oil needed to reduce the viscosity of fuel oil. The additionalproduction of diesel, even if demand were to remain at the FY85 level, will easily be absorbed within the country. While fuel oil will remain in surplus, it will be at e substantially lower level than without the project.
F. LPG Consumptionand Supply
2.17 Even after the refinery is modified,Bangladesh will need to import about 150,000 mTpa of kerosene,of which about 501 is estimated to be for cooking, for which LPC could substitute. In addition,firewood is used extensivelyfor cooking in the western zone of the country causing acute deforestation. Currently,about 7,000 mT of LPG is consumed annually in the Chittagongarea. The potential supply is considerablylarger. In the medium term, with the completionof the refinery modification,SIL's LPG production could reach a capacity of 13,000 mTpa; a further 5,000 mTpa could be recovered by modifying the existing Kailashtilagas treating unit. In the long term, it is estimatedthat up to 120,000 mTpa could be recovered from natural gas produced at the Bakhrabad,Beani Basar, Kailashtilaand Titas fields. Currently,LPC is consumed mostly in the eastern zone. With the availability of natural gas in the east, demand for LPG will decline. It is therefore likely that the entire additionalsupply of LPG from the refinery,about 6,000 mTpa, as well as some of the 6,000 mTpa of LPC currently consumed in the east, will be available for marketing in the west. It is also the objective of the Governmentto promote a greater balance between the western and eastern zones -8-
of the country in terms of access to energy sources. LPG is therefore targetted to be marketed increasinglyin the west where natural gas is not available.
2.18 Presently, neither the institutionalarrangements nor the facilities exist for distributionand marketing of LPG. The developmentof transporta- tion, storage and marketingnetworks for the smaller quantitiesof LPG from ERL and Kailashtilawould in effect constitute the first stage of a major drive to promote the use of LPG in Bangladesh. In line with its general policy to encourage the involvementof the private sector in the economy, it is the Government'sintention to seek the participationof private investors in this effort. Thu small-scaledistribution component included in the project provides an opportunityto initiate a strategy of active private sector participationin the area of LPG distributionwhich would lay the foundationfor a subsequentlarger project when a large-scaleLPG recovery plant (from natural gas) is constructed,possibly in the late 1980s. Agreement was reached in principlewith GOB during negotiationsto invite private sector participationin the project, as discussed in para 4.07. Participationof the public sector concern currentlyengaged in LPG bottling (LP Cas Limited) in parallel with a privately operated company would at once bring an element of competitionin the sector and help define the long-term arrangementsfor private participationin a subsequent larger project, inter alia, the need for monitoringof operations,enforcement of safety standards and the setting of a competitiveprice structure.
G. Pricing
2.19 Pricing of biomass-derivedfuels in Bangladesh is determined in the market place. Prices of petroleum products,natural gas, coal and electricity on the other hand, are set by the Governmentat various points in the delivery system and at the consumer level. Natural gas pricing aims to encourage substitutionwhile reflectingoverall economic costs. The prices of other energy products are uniform for all classes of consumers throughout the country,except for natural gas, for which GOB sets differentialprices for various classes of consumers.
1. Natural Gas
2.20 Gas pricing has been one of the principal ingredientsof IDA's economic dialogue with GOB. The average price of natural gas to industry was about $0.63 per thousand cubic feet (about one million Btu) in July 1984. Under the Second Gas DevelopmentProject approved in April 1985, GOB agreed on fixing gas prices and excise duty rates at such levels as to ensure that: (a) sale prices are higher than the long-runmarginal cost (LRMC) of natural gas after taking into account a depletionallowance; 1/ (b) the revenues from gas operationspermit the gas productionand distributionentities to remain financiallyviable and contributesubstantially towards future investments;
1/ Due to the relative abundanceof gas reserves in relation to demand, gas prices should as a minimum cover the costs of productionand distribution (LRMC) as well as an allowancereflecting the progressivedepletion of reserves rather than its substitutionvalue (opportunitycost). - 9 -
and (c) gas tariffs mobilize resources for the economy. In accordance with previous agreementsreached with IDA, natural gas prices were increased by 20X in July 1, 1985 to $0.76 per thousand cubic feet on the average for industrial consumers and again by 20% in July 1, 1986 to $0.91 per thousand cubic feet. During negotiationsfor the Second Gas DevelopmentProject, IDA also received assurances from GOB that, beginning July 1987, gas prices will be adjusted in accordancewith a program to be agreed with IDA based on the long-run marginal cost 4f extractiont transmissionand distributionplus an appropriate depletion allowance.
2. Petroleum Products
2.21 Consistentwith GOB policy of maintaining stable product retail prices, BPC has absorbed internationalcrude and product price fluctuations through its transfer prices to the marketing companies,which provide a buffer between internationaland domestic prices. Losses incurred during the early 1980s when internationalprices were higher than BPC's transfer prices are now being translated into profits due to the decline in internationalprices, which are currently lower than transfer prices.
2.22 Retail prices are well above border (c._.f.) prices although the relative pricing structurediffers significantlyfrom that of c.i.f. import prices, as shown in the following table:
Import Parity and Retail Prices of Petroleum Products, 1985/86 '$/per metric ton)
Ratio of Retail Import Parity Retail Prices to Import Price
Gasoline 169 571 3.38 Jet Fuel 150 379 2.53 Kerosene 140 272 1.94 Diesel 132 268 2.03 Fuel Oil 60 152 2.53
Retail prices have not been revised by GOB, pending stabilizationof crude oil and product prices in the region. Even though in relative terms gasoline is priced much higher than diesel in the domestic market (the current ratio is 2.2), there appears to be little uneconomic substitutionof diesel for gasoline. For road transport,this apparently happens because the taxation system and restrictionson the import of diesel vehicles offset the price differential. The potentialfor cross-substitutionbetween diesel and gasoline consumptionthrough a reductionin the price margin between these products is limited:while an increase in kerosene/dieselprices would run counter to some of GOB's key social and developmentobjectives in rural areas, a decrease in the duties on gasoline would encourage consumptionof gasoline in the highest income groups, but little of this incrementalconsumption could be expected to entail a correspondingdecrease in diesel use. - 10 -
3. LPG
2.23 LPG is a direct substitutefor kerosene in cooking and its substitutionvalue is thus related to the border price of kerosene. Both LPG and kerosene prices are above correspondingeconomic cos.s. A 12.5 kg cylinder of LPG is currentlymarketed at a price of Tk lOS at field depots. Taking into account the higher calorificvalue and combustionefficiency of LPG versus kerosene on a weight basis, LPG price could in effect be up to 150% that of kerosene,but is in fact 6% lower. The current price ratio of 0.94, however, provides financialconditions conducive to a rapid penetrationof LPG in the domestic market. While, in the short term, it seems appropriateto price LPG on the basis of its marginal costs of production,there is still scope to increase the price of LPG as the market develops,while maintaining its competitivenesswith kerosene. The government has agreed that it will not later than July 30, 1989 remove oil price controls over the distributionand sale of LPG.
H. IDA's Role and Lending Strategy in the Petroleum Sector
2.24 In the absence of other sources of commercialenergy, Bangladesh will have to rely increasinglyon natural gas and petroleum products to meet the demand of the modern economic sectors, as well as part of the basic needs of its growing population (householdenergy). The main concern of IDA over the years has been to ensure that adequate energy supplies are available at reasonable cost and that prospects for the developmentof domestic energy resourcesare identified,explored and developed efficiently. In order to achieve these objectives,IDA lending in the oil and gas sector has proceeded along three main lines addressingnatural gas, efficiency improvementsand explorationpromotion.
2.25 In the natural gas subsectorIDA has, in parallel with ADB, supported the developmentof the transmissionand distributioninfrastructure required to bring natural gas to the markets. It is also assisting in establishinga reliable reserve base from which Bangladesh'sfuture requirementscould be met. One gas infrastructureproject has been satisfactorilycompleted and gas appraisal projects are currentlyunder implementation. These projects have formed the basis for institutionalimprovements which in turn have led to the reorganizationof the gas industry and the concept of an integrated gas system. In terms of policies, IDA has strongly suggestedthe introductionof rational gas pricing policies,as described in para 2.20, and the development of new markets includingthe introductionof CNG in the transport sector.
2.26 One of the issues identifiedby the Energy Assessment was the inefficiencyof the energy processingand utilizationindustries, including the ERL refinery and a number of industrialplants. The refinery rehabilitationproject as well as the proposed project have addressed these issues and provided support for the rehabilitationof existing facilitiesand the introductionof energy conservationmeasures that would reduce the overall cost of supply. With this project, IDA will support the efforts of the Government in expandingLPG productionand use, thus increasing significantly the value of natural gas and petroleumproducts while makin_ available a clean fuel which could meet a significantshare of the residentialneeds in urban as well as rural areas (cooking and illumination). LPG could in the future play a significantrole in domestic energy supplies and attract domestic and foreign private investors. - 11 -
2.27 Finally IDA is supportingGOB's explorationpromotion program aimed at attracting foreign capital for exploration in areas which are believed to have oil potential. This three-prongedapproach will continue to be supported in the future through further lending operations.
III. THE BENEFICIARIES
3.01 The beneficiariesof the project are Eastern Refinery Limited (ERL) and LP Gas Limited (LP Gas), both of which are fully owned subsidiariesof the Bangladesh PetroleumCorporation (BPC), and the BangladeshOil, Gas and Minerals Corporation (BOGMC). BPC and BOGMC report directly to the Ministry of Energy and Mineral Resources (Chart 1). The operationsand performanceof BPC, ERLp BOGMC and LP Gas Limited are discusse4below.
A. Bangladesh PetroleumCorporation (BPC)
3.02 BPC is a fully state-ownedholding company establishedin 1976 to optimize crude oil and products procurementand implementGOB policy with respect to distributionand retail pricing of petroleumproducts. BPC management is vested in a GOB-appointedBoard of Directors consistingof a Chairman and five members. BPC operates as a trading company and supervises ERL, LPG Limited and three petroleummarketing companies (PMCs). BPC's subsidiaries,their responsibilitiesand ownership structureare summarized in Annex 3-1.
3.03 A review of BPC's operationsand management informatiensystems during the appraisal of the ongoing Energy Efficiencyand Refinery RehabilitationProject identifiedtwo major weaknesses that are presently being addressed: (i) the need to strengthenBPC's qualifiedcore group with additional staff with the skills and experiencenecessary for handling the growing volume, diversityand complexityof BPC opErations;and (ii) inadequacy in BPC's accounting and management informationsystems. About ten senior level staff are undergoing training abroad under the rehabilitation project. Further training is required to use the new procedurescontained in a recently completed set of manuals on accounting,management reporting, financialplanning and budgeting,and job evaluation. A manual dealing with internal audit procedures is also under preparationfor BPC's internal audit group.
3.04 BPC's financialposition is adequate. An area of continuing concern, however, has been the status of BPC's accounts receivables. These stood at 15 days of sales (as of June 30, 1985), with some customers, like the Bangladesh Power DevelopmentBoard (BPDB), in default for about ten months to the marketing subsidiaries. This is due in part to the absence of a definite credit period for invoices against BPC's subsidiariesas well as for those raised by the subsidiariesagainst large petroleumproduct customers. It was agreed during negotiationsthat GOB shall, not later than January 1, 1987, cause BPC to operate a system satisfactoryto the Association,which shall inter alia: (i) limit credits to a period of 45 days to subsidiariesand other direct customers of BPC's subsidiaries;and (ii) levy interestat the prevailingcommercial bank rate together with an appropriateadministrative charge on amounts outstandingbeyond 30 days of billing date. In respect of - 12 -
BPDB, it was further agreed that receivablesaccumulated up to June 30, 1986, would be required to be paid to BPC at a rate of not less than Tk 50 million per month until the arrears are fully cleared.
B. Eastern Refinery Limited (ERL)
3.05 ERL was establishedin 1966 as a fully integratedrefinery. From 1968 to 1985, Burmah Oil Company (BOC) of the U.K. had a 30% interest in ERL operations,entitling it to a guaranteed 15Z return (net of taxes) on paid-in capital. Recently, in keeping with corporate policy of disinvestmentfrom the refinery sector worldwide, BOC negotiated an agreementwith GOB to dispose of their ERL shares. Bank staff met with BOC management on several occasions to explore means of encouragingmore active BOC participationin ERL operations as well as in the proposed project. BOC, however, has firmly decided to withdraw from ERL, which is now fully owned by BPC.
3.06 The existing relationshipbetween BPC and ERL is not consistent with autonomous operationsand restrictsERL management initiativesand performance. ERL has no responsibilityfor productionoptimization, which is a function of BPC. BPC also exercisesclose control and supervisionof ERL's operatingbudget, capital investments,appointment of senior staff and day-to- day operations. Although ERL has its own Board of Directors,with the BPC Chairman also acting as ERL Chairman, ERL Board decisionsare still subject to final review and approval by the BPC Board. Although some form of control by BPC, being the sole owner of ERL, is justified, such control could best be achieved by having one of BPC'F full-timedirectors sit on both BPC and ERL Boards and assume executiverLdponsibility for ERL operations. Therefore GOB has decided that BPC's Director of Planning and Operationswill be appointed concurrentlyas Managing Director of ERL and will assume responsibilityas Chief Executiveof ERL starting January 1, 1987. GOB also agreed to raise the financialauthority of ERL's Chief Executive to Tk 5 million and thLt of ERL's Board of Directors to Tk 20 million. These limits would be reviewed by IDA annually,taking into account domestic inflation,and adjusted as necessary.
3.07 ERL operationsare headed by the General Manager who sits on its Board, and is assisted by several senior managers. Although the senior staff as well as the junior engineersare technicallywell qualified, the loss of many top-levelmanagers to foreign employment has resulted in lack of adequatelyexperienced staff in the company. Over the past few years, however, ERL has managed to retain senior staff. In order to strengthen skills at all levels, the ongoing Energy Efficiency and Refinery Rehabilita- tion Project made provisionfor a comprehensivetraining program. A training center is now in operationand management informationsystems are being upgraded as part of the technicalassistance provided to BPC as discussed in para 3.03.
C. LP Gas Limited (LP Gas)
3.08 LP Gas was incorporatedin 1983 as a fully-ownedsubsidiary of BPC. Bottled LPG is sold by LP Gas to BPC marketing subsidiarieswhich handle retail marketing either directly in gasoline stations or through private dealers. The organizationand staffing of LP Gas is scaled to its present operation of handling up to 6,000 mTpa only, and consists of a manager, foreman and skilled labor. The activities of LP Gas will be expanded during - 13 -
the project period to include two additionalbottling plants. LP Gas will also supply retail filling stations by trucks and supervisethe operationsof these stations. To carry out these tasks, LP Gas will require appropriate technical assistancesupport, preferablyfrom an experiencedLPG operating company. Technical assistanceis particularlyneeded in the implementationef the pilot retail filling station scheme and in drafting a set of operating codes and safety standards. The project provides for such technical assistance (para 4.08). Recruitmentof a General Manager for LP Gas, with qualificationsand experiencesatisfactory to the Association,will be a conditionof disbursementunder the LPG Storage and DistributionComponent.
D. BOGMC
3.09 BOGMC (previouslyPetrobangla) is the sector corporationresponsible for oil, gas and minerals explorationand production. BOGMC is managed by a GOB-nominatedBoard of Directors consistingof six members, includingthe Chairman,and is organized in four directorates(planning, finance, explorationand administration)and a Secretariat. While BOGMC coordinates the activitiesof operatinggas productionand distributioncompanies, it is not a holding company as such. A major reorganizationof the gas sector will take place with technicalassistance provided by ODA under the Second Gas DevelopmentProject to address the fragmentationof the existing organization. In lieu of the existing operatingcompanies, three new companieswould be created with responsibilitiesassigned on a functional rather than regional basis, i.e. for petroleumexploration and drilling, gas field development,and gas transmissionand distribution.
3.10 BOGMC assumes direct responsibilityfor the implementationof a large share of gas developmentprojects, including the Second Gas Development Project financed in part under Credit 1586-BD. BOGMC was also responsiblefor the constructionof the existing surface facilitiesat Kailashtilaand will implementthe LPG Recovery Component.
E. Accounts and Audits
3.11 BOGMC, ERL and LP Gas are required by law to prepare full accounts of their financial position and the results of their operation. Their accounting systems are reasonablygood. The companiesalso follow adequate internal control proceduresand are subject to two types of external audit: (a) external audit by a firm of charteredaccountants, after which the balance sheet and profit and loss account of each entity are to be presented to the general meeting of the stockholdersat least once during each calendar year; accounts are required to be ready for external audit within six months followingthe end of the financial year and are reviewed within three months after submission;(b) each entity is also subject to the Government's commercialaudit whose report is submitted to the concernedMinistry of the Government. Agreementwas reached with GOB that it will cause the three companies to supply the Associationwith copies of their unaudited financial statements,including the project accounts,not later than six months after the end of each fiscal year, and not later than nine months after the end of the fiscal year copies of the audited statementtogether with a copy of the report and comments of the Comptrollerand Auditor General. - 14 -
IV. THE PROJECT
A. ProjectObjectives snd Scope
4.01 The man objective of the project is to help minimize the cost of petroleum imports to the country by rationalizingthe supply of petroleum products and promotingthe substituteuse of LPG for kerosene. To help achieve this general objective, the project includes:
(a) a RefineryModification Component to enhance the flexibilityof the refinery in bringing about a better match between refinery output and petroleum products demand than has been possible hitherto, thereby reducing the cost of meeting petroleumproduct requirements;-nd
(b) an Early LPG Recovery, Storage and DistributionComponent to establish the institutionalframework and the facilities necessary to promote the use in the medium term of about 12,000 mTpa of LPG recoveredfrom natural gas and at the refinery, as a substitute for kerosene and firewood,and, in a longer term perspective,market the substantiallylarger quantity of LPG expected to be recovered from natural gas.
B. Project Rationale
4.02 The project is an importantelement of IDA's assistance in the country's energy sector. The refinerymodification component followed from the detailed techno-economicstudies undertakenby Lummus Crest (U.S.) under the on-going Energy Efficiency and Refinery RehabilitationProject (Credit 1357-BD). As noted in paragraph 2.15 and Annex 2-6, several options were evaluated includingthe possibilityof mothballingthe refinery and importing petroleumproducts. The study concludedthat continuedoperation of the refinery in its present configurationwas economic and that economic benefits would be enhanced by minor modificationsin the refinery configuration. IDA has been closely involved with the study and the evaluation of the various alternatives,impressing upon GOB the need to select a low capital option that minimizes the vulnerabilityof the investmentto future fluctuationsin the price margins among petroleumproducts, which is the major risk factor in refining operations. The main elements underpinningthe economic rationale for the refinery investmentare the imbalancebetween refinery output and domestic consumptionpatterns, the continuedneed for middle distillate imports, the surplus of fuel oil in the domestic market resulting from extensivegas use, the accentuatedprice margin between these two products brought about by Bangladeshabsorbing transportcosts for both import and export of petroleumproducts, and the low capital cost of the project.
4.03 The earl, LPG recovery componentand the LPG storage and distribution componentwill increase the economic value of existing gas production and set the basis for wider LPG use when gas productionfrom the Kailashtilafield is expanded. An importantelement of this componentis the setting up of the organizationalstructure and groundwork for marketing the substantiallylarger quantity of LPG expected to be recoveredfrom natural gas in the future. In particular,the projectwill support the entry of private investors in the - 15 -
area of LPG distributionin parallel with the existing public sector entities involved in the distributionof petroleum products, thereby initiatinga strategy of active private sector participationin the LPG sector and laying the foundationfor a subsequent larger LPG distributionscheme. The project wilL help bring about important institutionalchanges by enhancing ERL's autonomy and financial accountability,partly through the introductionof a toll fee processing scheme, and by building up the capabilitiesof LP Gas. Finally, each of the project componentshave been designed with a view to improving the operating efficiencyof the public entities involved and encouragingtheir developmentas revenue generatingprofit centers to which private investmentcapital could eventuallybe attracted.
C. Project Descriptionand ITplementation
1. Refinery ModificationComponent
4.04 Description. This componentwill consist essentiallyof the installationof secondaryconversion facilities in the refinery,resulting in improved yie:ds of middle distillatesand reduced yields of fuel oil. Specifically,this component involves the revamping the refinery's hydro- desulfurizerto a mild hydrocracker,the installationof a long residue visbreakerand associated facilities,detailed engineering,upgrading of existing facilitiesas required, bulk materials procurement,construction, start-up,training, and managementand technicalassistance. On completion of the proposed modificationof the refinery, the petroleum products yields will change as shown below: - 16 -
Refinery Yields Before and After Modification (in '000 mTpa)
Without a/ With Increase Production Modification Modification (Decrease)
LPG 13 13 -- Naphtha 102 114 12 Gasoline 49 49 -- Kerosene 331 344 13 High Speed Diesel Oil 341 458 117 Fuel Oil 631 478 (153) Bitumen 25 25 --
Total 1,492 1,481 (11)
Process Fuel (excludesnatural gas used as process fuel) 8 19 (11)
Total Crude Throughput 1,500 1,500 0
CrudeUsed - Arab Light (34.80 API)
a/ The product yields shown here are those now expected to be obtained upon completionof the ongoing refinery rehabilitationprogram. They differ from those shown in the appraisal report for the Energy Efficiency and Refinery RehabilitationProject as better results are now expected from the rehabilitationprogram than was anticipatedat appraisal.
In addition to the process units and ancillaryequipment, the project provides for operationsassistance, training and spares for preventivemaintenance for a period of five years.
4.05 Implementation. The implementationof the project componentwill be the responsibilityof ERL. The engineeringconsultants (C.E. Lummus), which carried out the original feasibilitystudy, have prepared the invitation-to- bid documents,including basic and project design specifications,and the necessaryproject details to enable the award of the contract on a lump-sum turnkey basis. Project implementationis expected to take 36 months, assuming implementationwill ceomencewith Credit effectivenessand ends with commissioningof the facilities. A General Contractorwill be selected to implementthe projectand provide operationsassistance on the basis of a single contract.A Project ImplementationCoordinator will assume responsibilityfor project implementation. A project unit, headed by the Project ImplementationCoordinator, will be establishedwithin ERL to superviseproject implementation. The Project ImplementationCoordinator will report to the Managing Director of ERL. A Project ManagementAssistance Team (PSAT) will be recruitedby ERL to assist with the executionof the project, includingevaluation of bids received,selection of the General Contractor, - 17 -
supervisionof works and establishmentof operating norms (para 5.04). The PMAT will answer directly to the Project ImplementationCoordinator. A detailed project implementationplan was submittedduring negotiations. The appointmentof the PNAT is a condition of effectivenessfor the Refinery ModificationComponent.
2. Early LPG Recovery, Storage and Distribution
4.06 Description. LPG from natural gas offers an opportunityto reduce the cost of imported petroleum fuels substantially. The quantity of LPG to be .marketedunder the proposed project component is relativelysmall, compared to the 120,000 mTpa expected to be recovered from the Bakhrabad,Beani Bazar, Kailashtilaand Titas natural gas fields in the future. The proposed project component provides the vehicle to develop the institutionalarrangements as well as the managementand operationalskills and distributionand marketing network, which are now lacking. This component is in effect a pilot project, the benefits of which would be fully realized with the marketing of larger quantit.esof LPG (possiblyup to 120,000 mTpa) in the future. The project component includes:(i) the modificationof existing gas treating facilities at Kailashtilato recover about 5,000 mTpa of LPG and 2,000 mTpa of condensate;(ii) installationof bulk LPG loading facilitiesat Chittagong to facilitate the loadingof LPG tankers; (iii) constructionof bulk storage and distributionterminals at Khulna, Kailashtilaand Baghabari; (iv) LPG tankers; (v) LPG cylinders; (vi) installationof bottling plants at Khulna, Baghabari and Kailashtila;(vii) equipment for eight retail filling outlets; (viii) LPG tank trucks; (ix) related infrastructurefacilities; and (x) training and operationalassistance to LP Gas.
4.07 Imelementation. The LPG recovery facilitieswill be implementedby BOGMC. No project implementationassistance is required as BOCMC has reasonably competentproject management staff who presentlyhandle projects of larger magnitude and complexity. Engagementby BOGMC of consultantsfor the design and detailed engineeringof the LPG recovery plant at Kailashtilawill be a condition of Credit effectiveness. The LPG Storage and Distribution componentwill be implementedin part by LP Gas and by a privately operated entity to be establishedwith the possible assistanceof the International Finance Corporation(IFC) and in which the Governmentmay take a minority participation. Both entities will share responsibilityfor the distribution of LPG in the western zone, LP Gas from a terminal located at Baghabari, the private entity from a terminal locatedat Khulna or any other suitable location in the western zone. LP Gas will be responsiblefor the construction of loading facilitiesat Chittagongand bottling plants and associated facilitiesat Baghabariand Kailashtila;both LP Gas and the private company for bulk transportof LPC from Chittagongto the western zone; and the private company for the constructionand operation of the Khulna bottling terminal and distributionof LPG therefrom. Agreementwas reachedwith GOB during negotiationsthat it will involve private investorsin the distributionof LPG along the lines suggestedabove (or any similar scheme). GOB has invited proposals from private investorsfor participationin the project. The establishmentof one or more privately owned LPG Storageand Distribution companies,on terms and conditions satisfactoryto the Association,will be a conditionof disbursement(except for the KailashtilaLPG bottling and storage facilities). - 18 -
4.08 Selected expatriate consultants,preferably from an operating LPG distributioncompany, will be engaged to assist LP Gas in designing and implementingthe different project sub-componentsfor which it is responsible, and in establishingsafety and inspectionstandards consistent with internationalstandards for the operationof the bottling facilities,bulk transportand retail stations. Recruitmentof LPG Distributionand Marketing Consultants,satisfactory to IDA, will be a conditionof disbursementunder the LPG Storageand DistributionComponent. The LPG Recovery Component is expected to be implementedwithin 24 months from the date of Credit effectivenessto start-up of facilities;and the LPC Storage and Distribution Componentabout 30 months from Credit effectivenessto extensionof distributionto all areas envisaged (Chart 2).
D. Project PreparationStatus
4.09 The Refinery ModificationComponent is at an advanced stage of preparation. The consultantsengaged for the techno-economicfeasibility study are also responsiblefor preparationcf the project design including basic engineeringup to the preparationof piping and instrumentdrawings and invitation-to-biddocuments. The feasibilitystudy was completed in March 1985. At the request of the Associationfurther work was done to define the scope of the project. This was completed in October 1985. The consultants completed the project design and basic engineeringin early April 1986. BPC and ERL have reviewed and finalized the design package. The invitation-to-bid documentsnecessary for the selectionof the General Contractor is expected to be issued by November 1986.
4.10 The feasibilityof an LPG Recovery Componentat Kailashtilahas been established. An engineeringfirm responsiblefor the detailed engineeringhas been selectedby BOGMC; contract arrangementsare expected to be finalized by the end of 1986. The scope of the LPG Storage and DistributionComponent was developedby BPC together with IDA staff. No extensive design work is needed other than a detailed work plan, the design of infrastructurefacilities of a modest scale, and procurementof LPG tank crucks and cylinders, BPC together with LP Gas are currently developingproject proformas for all needed items. - 19 -
E. Capital Cost Estimates
4.13 The total financingrequirements of the project, includingphysical contingencies,price escalation and interest during construction,are estimatedat US$81.3 million equivalent,of which $47.0 million are in foreign exchange,as shown below:
Project Cost Estimates (inUS$ million)
Foreign Local al Total
I. Refinery Modification (}) Refinery Modificationand Operations Assistance 21.7 6.4 28.1 (2) Project Management Assistance 1.0 0.1 1.1 (3) Trainir.gand TechnicalAssistance 0.5 0.1 0.6 (4) Spare Parts 3.2 0.8 4.0
Sub-total 26.4 7.4 33.8
II. LPG Recovery Facilities LPG Recovery Facilities at Kailashtila 3.5 0.7 4.2
Sub-total 3.5 O.7 4.2
MII. LPG Storage and Distribution (1) LPG 3ottling Plants 0.6 0.2 0.8 (2) LPG Bottles .3.0 0.6 3.6 (3) LPG Transport (Trucks and Barges) 3.0 0.8 3.8 (4) LPG Retail Filling Units 0.2 0.2 0.4 (5) ImplementationAssistance/Training 0.5 0.2 0.7 (6) InfrastructureFacilities/Port/Land 1.3 1.3 2.6
Sub-total 8.6 3.3 11.9
Base Ccst Estimate (Total of I, II & III) 38.5 11.4 49.9 Physical Contingencies 3.9 1.1 5.0 Price Contingencies 10.1 3.8 13.9
Total Cost 52.5 16.3 68.8
Interest during Construction - 12.5 12.5
Total FinancingRequired 52.5 28.8 81.3
a/ Local costs incl-udeUS$8.2 million of customs duties. - 20 -
4.14 Base cost estimatesare expressed in June 1985 prices and were developedbased on: (i) the Refinery ModificationStudy prepared by the consultants,CeE. Lummus; (ii) BOGMC and IDA estimates for the Early LPG Recovery Component; and (iii) BPC and IDA estimates for the LPG Storage and DistributionComponent. Physical contingenciesare 10% of the base cost. Price contingenciesare based on projected internationaland local price increasesof 7% in 1986, 7% in 1987, 7.5Z in 1988, 7.6% in 1989, and 4.5% in 1990 for foreign costs; 10% each year from 1985 to 1990 for local costs. Consultant services are estimatedat 60 man-months for project management assistance to ERL and 24 man-months for LPG tistributiQnand marketing assistance.
F. Financing Plan
4.15 The financingplan for the project is establishedas follows:
LPG Refinery LPG Storage and Modification Recovey Distribution Total ------US million)------
Long-TermDebt (IDA) 35.5 4.6 5.8 45.9
GOB Equity Contribution - IDA Credit - - 1.1 1.1 - Own Resources 12.3 3.7 3.5 19.5
Internal Cash Generation (ERL) 7.3 - - 7.3
Private Investors - 7.5 7.5
Total 55.1 8.3 17.9 81.3 (of which interest during construction) (9.6) (1.8) (1.1) (12.5)
4.16 The IDA Credit (US$47 million) will cover about 90% of the project cost net of taxes and duties and of the contributionof private investors. The proceeds of the Credit used for the Refinery ModificationComponent, the LPG Recovery Componentand the publicly-managedLPG Transportation,Storage and DistributionComponent will be onlent by GOB to ERL, BOGMC and LP Gas at a rate of 11.5% for a period of 15 years, includinga grace period of four years, on the basis of SubsidiaryLoan Agreements satisfactoryto the Association. The proceeds of the IDA Credit to finance BPC's share (US$1.1 million) in a privatelyoperated LPG Storage and DistributionCompany will be passed on to BPC as equity. A conditionof effectivenesswill be that the SubsidiaryLoan Agreemertsbetween GOB and ERL, BOGMC and LP Gas respectively, have been executed and that the Project Proformashave been approved by COB. During negotiations,assurance was obtained from GOB that it will make available to the beneficiarieson a timely basis any local and foreign currency funds includingcost overruns that may be needed to complete the project. - 21 -
G. Procurement
4.17 The procurementarrangements are summarized in the table below:
-- …(----(-US$ million)---- Project Element Procurement Method ICB Other N.A. a/ Total Cost a) Equipment and Materials IncludingInstallation and Start-up (Lump Sum Turnkey)
(1) Refinery Modification 30.6 - 5.4 bI 36.0 (27.0) (-) (27.0)
(2) LPG Recovery Plant 6.1 - 0.4 b/ 6.5 (4.6) (-) (4.6)
b) Equipment SuppLy (1) LPG Handling Equipment and LPG Cylinders 4.2 2.0 c/ 0.9 b/ 7.1 (2.9) (1.0) (-) (3.9)
(2) LPG Trucks and Tankers 4.8 - 0.9 b/ 5.7 (2.0) (-) (2.0)
(3) Spare Parts for ERL 4.2 2.0 c/ 1.0 b/ 7.2 (4.2) (2.0) (-) (6.2)
c) Civil Works - - 3.0 3.0
d) Project Implementation Assistance/Training - 3.3 d/ - 3.3 (3.3) (3.3)
49.9 7.3 11.6 68.8 e/ (40.7) (6.3) (-) (47.0)
Note: Figures in parenthesisare the respectiveamounts to be financed by IDA.
a/ Not applicable bl Customs duties cl Limited InternationalBidding d/ Following IDA guidelines for the use of consultants e/ Net of interest during construction - 22 -
4.18 All contracts,equipment and materials to be financed by IDA will be procured in accordance with IDA procurementguidelines. International competitivebidding (ICB) will be used for the procurementof individualitems costing over $200,OOO. For purposes of evaluationand comparisonof bids for the supply of goods procured under ICB, qualified domestic supplierswill be allowed a margin of preference equal to 15% of the CIF bid price of imported goods or the actual customs duties and import taxes, whichever is less. Small items costing less than US$200,000,up to an aggregate of US$4.0 million, will be procured through limited internationalbidding after solicitationof quotationsfrom qualified suppliersfrom at least three IDA-eligible countries. To the maximum extent possible,identical or similar items shall be grouped together for the purpose of bidding and procurement. Consulting services for project implementationassistance and training will be awarded in accordancewith IDA guidelines on the use of consultants. There is no provisionfor local competitivebidding.
H. Disbursements
4.19 An estimated schedule of Credit disbursementsis given in Annex 4-1. Disbursementsare expected to be completedby December 1992. The rate of disbursementfor the LPG Componentfollows the historic disbursementprofile for industrialprojects in the South Asia Region. For the Refinery ModificationComponent a faster rate of disbursementover the same spread of years as for the LPC component is provided for. For the Refinery Modification Component,the procurementwould mainly be lump sum turnkey in nature and thereforespeedy. There is also the recent experience of a major energy project in Bangladesh,the BakhrabadGas DevelopmentProject (Credit 1091-BD), which has been completed in less than four years with all disbursements effected.
4.20 Disbursementswill be fully documented. A special account with an authorizedallocation of US$5.0 million equivalent,representing about four months of IDA-financedexpenditures, will be establishedin a Bangladesh bank. The proceeds of the IDA Credit will cover, net of taxes and duties, the followingcomponents:
Category ERL iOGMC LP Gas Total EligibleExpenditure …(USS million).
a) Equipment/Materials includinginstallation
and start-up 22.0 4.0 - 26.0 ) 100%of foreignexpenditure, ) 100%of localexpenditure ) (ex-factory),and 80% of ) localexpenditure.
b) Equipment/Materials ) 100%of foreignexpenditure, excludinginstallatici ) tO0%of localexpenditure or any other services 5.0 - 5,9 10.9 ) (ex-factors)
c) ProjectImplementation/ Training 1.5 - I eO 2.5 100% 28.5 4.0 6.9 39.4 Unallocated 7.6
Total 47.0 - 23 -
I. Monitoringand Reporting
4.21 ERL, BOGMC and LP Gas will be required to submit to the Association quarterly project progress and procurementstatus reports within 30 days of the end of each quarter. In addition,within six months after closing date of the project, each company will prepare and furnish to the Associationa completionreport on the project, dealing with its implementation,initial operationsand the costs and benefits derived and expected to be derived therefrom.
J. Ecology and Safety
4.22 The refinery does not dischargeany liquid or solid wastes harmful to the environment. However, oil sludge some of which could contain lead from the gasoline tanks are either dumped in ponds or have been left in non-usable tanks in the past. With the repair and rehabilitationof tanks, sludge can no longer be accumulatedbut will be treated in the separatorsand disposed of either as fuel oil, blended into asphalt or burnt. The rehabilitationof the process heaters will reduce significantlythe level of sulfur and nitrogen oxide emissions.
4.23 Recovery of LPG from refinery gas or natural gas is a clean, non- polluting process and creates no harmful by-products. Process facilitiesboth at the refinery and at the Kailashtilagas treating plant will be designed in accordancewith internationalstandards for the industry. The marketing of bulk or bottled LPG is also a clean and safe process. The loading and unloading of bulk LPG cause the discharge of minute quantitiesof non-toxic gas into the atmosphere. However, compared to the dischargesassociated with the transfer of other petroleumproducts, the contaminationcaused by LPG is negligible. Unlike other petroleumproducts, LPG is deliveredand stored until consumed under pressure. All equipment and storage vessels including cylinderswill be designed in conformitywith standardsapplicable to pressure vessels as stipulatedby the American Society of MechanicalEngineers (ASME) or comparable safety codes, and procured from supplierswith experienceof not less than ten years in the fabricationof such equipment/facilities.In addition, to ensure proper maintenanceof facilities,the project provides for technicalassistance in LPG market,ngand distributionto help establish adequate safety and inspectionprocedures, provide training of staff and superviseoperations during the initial period.
K. Insurance
4.24 Both ERL and LP Gas have adequate insurancecoverage for buiLdings, machinery,stores and spares against various risks includingfire, flood and cyclone. The proposedRefinery ModificationProject will be adequately covered during the constructionand erection phase and, following commissioning,under an integratedinsurance plan consistentwith accepted pracLices ir.the industry. Insurancecoverage for LP Gas will be extended to cover new facilitiesas well as LPG tankers and tank trucks. The Kailashtila LPG recovery facility will similarlybe covered under the existing insurance policy for the gas treating plant. - 24 -
V. FINANCIALANALYSIS
5.01 Financial analyses were carried out for each project component separately. The separate projectionsfor ERL are discussedbelow. The financialoutlook of BOGMC's gas operating companieswas discussed under the Second Gas DevelopmentProject, for which an IDA Credit was approved in April 1985, and financialcovenants were agreed at that time to safeguard their financialviability. The small LPG Recovery Component included in the proposed project is not expected to modify significantlythe gas production operationsplaced under BOGMC.
A. Refinery ModificationComponent
1. ERL's Past Financial Performance
5.02 The current arrangementbetween ERL and BPC (which is responsible for crude oil procurementand marketing of refined products)provides for ERL to be reimbursed by BPC for all its processing costs and be given, in addition,a 15X return on its paid-up capital, net of taxes. 1/ This has provided ERL with an assured minimum, albeit limited, level of profitability. ERL's operating expenses have remained at reasonable levels, with an average processing cost of less than US$0.65/bblof throughputover the last two years, which compares satisfactorilywith similar (hydroskimming)refineries elsewhere. Profit levels have been particularlymodest since FY84 mainly due to large tax obligations. A summary of ERL's financialperformance in recent years is presented in Annex 5-1. Key statisticsare summarizedbelow:
ERL - Summary of Recent Financial Performance (in million Takas)
FY82 FY83 FY84 FY85 (Unaudited)
Gross Revenue 129.4 143.3 130.8 138.8 Operating Profit 18.7 25.6 20.3 17.3 Net Profit After Tax 17.9 22.6 12.0 11.5 Current Assets 197.1 219.9 269.6 306.4 Current Liabilities 81.3 63.1 82.7 79.3 Net Fixed Assets 149.1 155.6 138.2 143.7 Long-TermDebt 207.6 127.5 135.7 174.9 Equity 57.3 184.9 189.4 195.9
Ratios Net Profit/GrossRevenue (%) 13.8 15.8 9.2 8.3 Net Profit/FixedAssets (X) 12.0 14.5 8.7 8.0 Current Ratio 2.4 3.5 3.3 3.9 Long-Term Debt/EquityRatio 78/22 41/59 42/58 47/53
1V In addition there is a bonus of 25% on the value of any process fuel that it may save from the 4.5% process fuel and losses allowed by BPC, or a penalty if process fuel and losses should exceed 4.5%. - 25 -
5.03 The long-termdebt/equity ratio stood at 78:22 on June 30, 1982 (during the appraisalof the ongoing Energy Efficiencyand Refinery RehabilitationProject) - a ratio which the Associationconsidered too highly leveraged. Of the Taka 212 million long-termdebt outstandingat that time, nearly 60% (Taka 124 million) was related to debts contracted before the creation of Bangladesh. The liabilityhas since been transferredto a capital reserve account in ERL's books and is thus no longer shown as a long-term debt. Nevertheless,it remains a contingent liability. During negotiations GOB agreed to raise the paid-in capital of ERL by Tk 1,200 million by a correspondingreduction in the long-term debts that ERL owes to GOB. Such conversionof debt to equity will be a condition of disbursementfor the refinery modificationcomponent, Following this change, the debt-equityratio of ERL, even reckoningthe pre-independenceliability as debt, is expected to fall below 65:35.
2. Remunerationof ERL
5.04 The current arrangementbetween BPC and ERL for the remunerationof ERL refinery operations (para 5.02) is not satisfactoryin that it does not provide ERL managementwith adequate incentives to improve cost efficiency. As a result of the project, the refinery will help generate revenues sufficient to cover all production costs as well as provide an adequate return on capital employed (para 5.06). The problem for GOB is (a) to allocate the incrementalincome that will accrue as a result of the project among ERL, BPC and itself through excise duties, (b) decide on a financialstructure and a fair dividend policy for ERL, and (c) establisha remunerationpolicy to ERL that provides incentivesto ensure operationalefficiency. Refineries similar to ERL generallyoperate on the basis of a processingfee per barrel of crude feed that reflects the complexityof their configuration,in addition to an allowancefor refinery fuel and losses. IDA impressedupon GOB the desirabilityof switchingERL operations to such a toll processing fee arrangement. Agreementwas reached during negotiationsthat ERL's mode of remunerationwill be changed, beginningJanuary 31, 1987, to a system in which ERL will be paid a processingfee per barrel (in dollar equivalent)fixed at a level that would provide ERL with a reasonablerate of return (about 1OZ) on revalued assets employed in refinery operations under efficient operating conditions,with a system of rewards and penaltiesdesigned to maximize the output of middle distillatesbased on a set of operatingnorms. The details of the system of norms, rewards and penaltieswill be prepared by BPC/ERL, with the assistanceof their engineeringconsultants for the rehabilitated refinery,and that of the PMAT (para 4.05), for the refinery as it will be operatingupon completion:,of the modificationproject. The proposed set of norms for the rehabilitatedrefinery will be submittedto IDA prior to Credit effectiveness. IDA also reached agreementwith ERL that it will submit to the Associationan optimizedproduction program every six months during the project implementationperiod, togetherwith a review of the extent to which agreed targets and norms have been met over the preceding six months.
3. FinancialProjections
5.05 Proforma financial statements(income, sources and applicationof funds and balance sheet) for ERL with the proposed modificationwere prepared in constant 1985 Takas on the basis of ERL's fiscal year (July 1 to June 30). The projectionsare based on the assumption that ERL will receive a - 26 -
processing fee per barrel of crude oil of $l/bbl between FY87 and FY90 and of $1.35 afterwards (i.e. after completionof the project) -- a level well within the average netback margin of $3-4 per barrel expected by 1990. The projectionsfurther assume an increase in the paid-in capital of ERL by Tk 1,200 million by reductionof ERL long-termdebt to the Government (para 5.03). The detailed projections,together with the assumptionsused, are in Annex 5-1. Highlightsof these projectionsare given below:
ERL - Summar of FinancialPro ections in million 1985 Takas)
(Unaudited Actual) Estimates FY85 FY87 FY90 FY93 FY95
ProcessingFee (includingfuel savingbonus) 138,8 267.9 468,9 468.9 468,9 IncomeBefore Taxes 21.5 24.7 93.1 86e6 139.8 Not IncomeAfter Taxes 11,5 24.7 93,1 86.6 69X9 CurrentAssets 306.4 463,4 663.9 832.2 1010.1 CurrentLiabilities 74.2 106.1 247.7 247.7 307.3 FixedAssets in Operation 127.2 647.9 1395.9 934,3 584.5 Long-termDebt 174.9 773,5 1183,8 772.3 508,4 Equity 201.0 464,6 903,2 958.2 990.7
Ratios
IncomeBefore Taxes/ GrossRevenue (%) 15.5 9.2 19.9 18,5 29.8 Net Incomeafter Taxes/GrossRevenue( 8.3 9,2 19,9 18.5 14.9 OperatingProfits/ OperatingFixed Assets (%) 15 13 11 15 23 CurrentRatio 4e1 4.4 2.7 3.4 3.3 Long-termDebt/Equity Ratio 47/53 63/28 57/43 42/55 34/66 Debt ServiceCoverage - 2e4 2,5 1.3 1,5
5.06 The projectionsindicate that, based on the processing fee levels mentioned in para 5.05, ERL's financialposition will be satisfactory. The financial internal rate of return for the refinery as a whole for the 16 year- operating life of the project (1987-2003)is estimated at 11%. The debt service coverage ratio, initiallydown to 1.2 in FY91 when repaymenton the proposed loan begins, improves to 1.3 or higher thereafter. The operating return on net fixed assets in operation is also satisfactory,starting at 11% in FY91 and improvingto 23% in FY95. The financialcovenants agreed under Credit 1357-BD (Energy Efficiencyand RehabilitationProject) will be maintainedunder the project but for one change indicatedbelow. The covenants require that: (i) ERL's long-termdebt/equity ratio will not exceed 65:35 from FY87. To this end, as a condition of disbursementthe government would convert Tk 120 million of ERL's debt to the government to equity; (ii) ERL's current ratio will be at least 1.5:1 from FY87; (iii) no dividend will be declared by ERL if this would cause its current ratio to fall below 1.5; - 27 -
(iv) ERL will not incur any additionaldebt if this would cause ERL's debt service coverage in any fiscal year to fall below 1.3 (it is 1.5 for each fiscal year under Credit 1357-BD);and (v) ERL will not make any investments in fixed assets in excess of an aggregateamount of US$5.0 million without prior approval of IDA. The reduction from 1.5 to 1.3 in the minimum debt service ratio will not adversely affect the financialviability of ERL consideringthe combined impact of the other covenants.
B. Earl LPGRecoverComonent (BOGMC)
5.07 The recovery of LPG from natural gas at Kailashtila is expected to be financiallyviable despite the small-scalesize of the undertaking,partly on account of the additional recovery of condensate. The financialprojections at Annex 5-2 and summarizedbelow assume a transfer price of LPG to LP Gas of Tk 3,500/ton (US$113/ton). The assumed transfer price of LPG would also ensure the financialviability of downstream distributionactivities, as discussed in the followingsection.
Summary of FinancialProjections (in Million 1985 Takas)
FY91 FY93 FY95
Revenue LPG 14.0 17.5 17.5 Condensate 6.4 8.4 8.9
Operating costs 7.9 8.0 8.0
Net cash flow (operations) 12.5 17.9 18.4
C. LPG Storage and DistributionComponent (LP Gas)
5.08 This project component,to be implementedby a combinationof public and private sector entities, is of a pilot nature and carries costs that could benefit the larger LPG distributionoperations that will be needed in the future. Moreover, the project is to be used as an instrumentto test consumer acceptanceof a differentmode of retail marketing. Even though the current retail price could be increased (para 2.23), it is not proposed to effect any major change in order to encourageconsumption of LPG. As the market expands, there will be scope to increasethe retail prices in order to help finance new investments.
5.09 BPC currentlytransfers about 6,000 tons of LPG from ERL to LP Gas at a price of Tk 5,200/ton (US$168/ton). LP Gas in turn transfersbottled LPG to the marketing companiesat its battery limits at Tk 7,600/ton (US$245/ton). The marketingcompanies then sell the bottled LPG to consumersat Tk 8,400/ton (US$270/ton)ex-depot. While the existing pricing arrangement,which allows a margin of approximatelyTk 2,400/ton (US$77/ton)to LP Gas, is adequate for the disposal of LPG within the Chittagongarea, it will be necessary to raise this margin substantiallyto cover the cost of transportto the western zone. The current ex-refineryprice of LPG was fixed based on the rationale - 28 -
that the alternate use of LPG in the refinery was as refinery fuel, displacing fuel oil, the refinery fuel at the time. Following the recent substitutionof natural gas as refinery fuel, the ex-refineryprice for LPG should be adjusted downwards to reflect the opportunityprice of natural gas to the refinery (currentlyUS$63 per ton equivalent). There is also room to adjust the consumer price of LPG upwards taking into considerationthe relatively high economic value of LPG vis-a-vis'kerosene,as discussed in para 2.23. The financial projectionsin Annex 5-3 assume a margin of Tk 7,100/ton (US$230/ton)for the LPG produced at the refinery and Tk 5,550/ton (US$180/ton)for the LPG to be produced at Kailashtila. On this basis, the financial internal rate of return for the LPG storage and distribution component is estimatedat 1OZ, which is adequate.
5.10 The financialprojections show that there would be sufficient internal generation of cash to meet debt service commitments,although both LP Gas and the private sector company would be building up assets for distributinglarger quantitiesof LPG in the course of time. In order to assure LP Gas of an adequate margin on the sale of LPG, agreement was reached with GOB that the transfer prices of LPG from ERL and BOGMC to LP Gas, and bulk and bottled LPG from LP Gas to the marketing companies,will be reviewed at least every 12 months beginningJune 30, 1987, and set at such levels as will ensure that LPG Limited has sufficientinternal cash to meet, in the minimum, all its operatingcosts and debt service payments. This understandingis also expected to guarantee satisfactoryoperating conditions for the privatelyoperated company.
5.11 Cylinders procured by LP Gas will be sold to the marketing companies and/or private dealers except for a small inventoryto be retained by LP Gas. Cylinders and regulatorswere originallydistributed at a price of Tk 500; the selling price was then reduced to Tk 350 to encourage consumptionand subsequentlyraised to Tk 1,000 when the petroleummarketing companies purchasedadditional cylindersand were allowed to recover their costs from customers. The current price of Tk 1,000 (US$33) is adequate in relation to the import price of cylindersbut will require monitoring. During negotiationsGOB agreed to set the price of cylindersto reflect import costs as well as applicabletaxes and duties and to review cylinder prices at least once a year.
VI. ECONOMIC EVALUATION
A. Introduction - Past Trends
6.01 The margin between the price of petroleum products and that of crude oil determines the economicsof refinery operations. For ERL, the petroleum product prices in Singaporewill largelydetermine this margin. Over the period 1976-1984,when crude oil prices at Singapore (in 1985 dollars) increasedfrom US$136/ton to US$242/ton in 1982 and then decreased to US$210/ton in 1984, the margin ac Singaporefluctuated from US$35/ton in 1976 to US$70/ton in 1981 but touched a low of US$11/ton in 1984. While the economicsof a refinery as a whole would depend on the price margin between products and crude oil, the economic viability of a secondary conversion project for processeswhich increase the yield of diesel oil is determined by the price differencebetween diesel oil and fuel oil. For the period 1976- - 29 -
1984, this differentialat Singapore (in 1985 dollars) changed from US$65/ton in 1976 to US$48/ton in 1981 and to US$68/ton in 1984, reaching its lowest level at US$46/ton in 1977. During the first quarter of 1986, subsequent to the decline in the price of crude oilt the differentialincreased to US$751 ton. A graph showing the price variations,in 1985 dollars, at Singapore for crude oil, diesel oil and the compositeproduct (the product mix to be achieved at ERL after the project is implemented)is presented in Annex 6-3.
B. Crude Oil and Product Price Assumptions
6.02 Until September 1985, the margin between the price of crude oil per barrel and the composite price (i.e. the value of products derived from a barrel of crude oil) as well as the differentialbetween the prices of diesel oil and fuel oil showed almost no change over 1984. Thereafter,despite the onset of a rapid decline in the price of crude oil, product prices have not declined as rapidly, and the margin between the crude oil price and the composite price, as well as the interproductdifferentials, particularly between distillatepetroleum products and fuel oil, have tended to be higher.
6.03 For the economic analysis, the crude oil price projectionsup to 1995 developed by the Economic Analysis and ProjectionsDepartment (EPD) in April 1986 have been used, together with mission estimates up to 2000. For product price projections,product-to-crude oil price ratios developedby the Bank in November 1984 1/ have been used. These ratios were developed in the perspectiveof the higher crude oil prices then prevailing and projected,as well as the relatively low margins (in US$ or equivalent)in refining and marketing. The current scenario is of far lower crude oil prices but improvingrefining axidmarketing margins. It would follow that since the lower crude oil price projectionsare being used for the economic analysis, the product-to-crudeoil price ratios should be higher. Nevertheless,it was decided to adopt the ratios as developed in November 1984. As a result, product prices used in the economic analysis are lower than what they are in the current market, thereby yielding economic rates of return which, although depressedby the conservativeproduct price assumptionsused, remain sufficientlyattractive. The projectedcrude oil and petroleum product price.._ used in the analysis based on the assumptionsjust explained are given below (in constant 1985 dollars):
Product Prices (USM/ton) (FOB Singapore)
1990 1995 2000
Naphtha 154 172 198 Gasoline 173 191 219 Kerosene 165 182 209 Diesel 157 175 201 Fuel oil 88 112 129 Crude oil 122 140 161 CompositeProduct Price 135 154 177
1/ World Bank Technical Paper Number 32. World Refinery Industry:Need for Restructuring. - 30 -
C. Refinery Operations
1. Refinery ModificationComponent
6.04 The economic benefits to be derived from the modificationcomponent will come mainly from increasedyields of premium value middle distillate products, namely, kerosene and diesel oil. The economic evaluation for this component is based on a comparisonof the net benefits of meeting the country's petroleum product requirementswith and without the project, taking into account the incrementalcapital and operating costs of the new facilities,the loss in revenue from reduced output of fuel oil and the benefits to be derived from the increasedyield of middle distillates. The economic capital cost of the project component excludes interest during construction,import duties and local taxes. The base case for the economic evaluation relates to the EPD crude oil price projectionsand petroleum products prices given in para 6.03. On these price assumptions,the project has an ERR af 21%. The economic analysis is presented in detail in Annex 6-1.
6.05 Sensitivitytests were carried out to arrive at a range of diesel-to- fuel oil price differentialsover time, at which the project breaks even at the cost of money (12%). For this to occur, the differentialwould have to fall and remain at less than US$45/ton (in 1985 dollars). This is higly improbable,when tested against the past from 1976. In 1977, the differential was at its lowest at US$46/ton (in 1985 dollars), at which time the price of crude was US$133/ton. In 1984 when the margin between the compositeproduct price and the price of crude was at the lowest for nine or ten years, at US$11/ton,the differentialbetween diesel price and fuel oil price was US$68/ton. The differentialbetween diesel price and fuel oil price apparentlycorrelates better (excludingmarket factors)with the inve_.tments needed to produce more diesel oil than with either the price of crude oil or with the overall refinery margin. In 1977, the unit value index of manufacturedexports 1/ was 75.9 on a 100 base in 1985.
2. Refinery As a Whole
6.06 The economic evaluation of the refinery is based on the estimated value of existing facilitieson completionof the ongoing rehabilitation program and proposed modifications,using the same base case assumptionsas for the refinery modificationcomponent for crude oil and product prices. On this basis, the refinery shows an ERR of 18%. The detailed economic analysis is provided in Annex 6-2. The refinery'seconomic viabilitywas first tested to determine the margin between the compositeproduct price and that of crude oil (using Singaporeas the reference location),which would bring the ERR down to 12%, assigninga replacementvalue (depreciated)to the refinery as it exists. Such a margin would be US$10.5/ton(in 1985 dollars). if investments in the refinery as is (before rehabilitationor modification)are taken as sunk costs, the margin has to be only US$9/ton. It is unlikely that such low
1/ Unit value index of manufacturedexports from five industrialmarket economiesexporting to developingcountries on a CIF basis (EPD published data). - 31 -
margins would come to prevail at any time. Two graphs (see Annexes 6-4 and 6-5) illustratehow the margins between the composite product price and the crude price are projected to behave in the period 1987-2000,the first in the 'base' case, and the other in a 'minimum'case where the ERR of the refinery would drop to 12%. The result of other sensitivitytests are given below:
Sensitivity Analysis on Economic Rate of Returr. % Base Case (Refineryas a Whole) 18
Capital cost increase by 30% 15 Delay of 2-year in project implementation 11 Capacity utilizationless by 30% 13
D. LPG Recovery, Storage and Distribution
6.07 For the purpose of economic analysis, the recovery and distribution of LPG at Kailashtila,and the storage and distributionof LPG in the western zone are consideredas two inde;endentoperations. The KailashtilaComponent comprises recovery of LPG (5,000 tons) by BOGMC and its storage, bottling and sale by LPG Ltd. The Western Zone Componentcomprises storage, bottling, transportationand distributionof the additional LPG (6,000 tons) to be produced by ERL, to be handled by LPG Limited and the privatelyoperated company.
1. KailashtilaLPG Component
6.08 5,000 mTpa of LPG are expected to be recoveredand distributedunder thia project component. The input streams consist of 3,000 mTpa recovered from pipeline gas and 2,000 mTpa from flared gases. The input cost of all 5,000 mTpa is the aggregateof its value as natural gas at the wellhead, plus the fixed and operating costs of recovering,bottling and distributingthe LPC. Annex 6-6 gives the estimatedcapital and operating costs for this component. For deriving the benefits the economic evaluationassumes that one metric ton of LPG replaces 1.50 mT of kerosene, taking relative heat content and combustionefficiency into account. Condensatewhich comes as a by- product when recoveringLPG from natural gas yields additionalbenefits taken at the value of crude oil. The estimatedERR is 17%, which is satisfactory for a pilot project. Sensitivitytest results below indicate that the pilot project remains viable under a wide range of values for the main parameters.
SensitivityAnalysis on Economic Rate of Return
Base Case 17
Capital Cost Up 30% 12 Kerosene Price Down 20% 13 Demand Down 20% 12 - 32
2. Western Zone LPG Component
6.09 The economic analysis assutmesthat LPG will substitutelargely for kerosene and that 1 ton of LPC will displace 1.5 tons of kerosene or the basis of their relative combustionefficiencies and calorificvalues. Economic cost of the feed stream is assumed to be the economic cost of natural gas at the refinery plus cost of recoveringLPG in the refinery. The estimated capital and operatingcosts and the economic evaluationfor this component is given in Annex 6-7. This component is sensitive,among other factors, to bulk transportatiencosts. While the facilitiesprovided under the project are capable of handling larger quantitiesof LPG, the economic evaluationis based on the distributionand marketing of the additional 6,000 mTpa only. The ERR for this component is 15%, and would improve rapidly when larger quantities become available in the future. Results of sensitivity tests are summarizedbelow:
SensitivityTests on Economic Rate of Return
Base Case 15
Demand Down 20% 10 Kerosene Price Down 20% 10 Capital Cost Up 30% 11
E. Project Risks
1 Refinery Modification
6.10 The main risks are those resulting from changes in the international price of crude oil and petroleumproducts. With respect to the refinery modificationcomponent, the anticipatedeconomic return is satisfactoryeven at price margins between diesel.and fuel oil well below past levels. There is little risk of the margin between petroleumproducts and crude oil deterioratingto such an extent that refinery operations,with the proposed modification,could become temporarilyuneconomic. The project is expected to enhance the refinery'sviabilicy.
2. LPG Recovery,Storage and Distribution
6.11 With regard to the LPG components,the LPG wrtrketis virtually untapped and I s will displace mainly kerosene and firewood -- both high value fuels. The ri,ks of the benefits being eroded to a level that makes the project components uneconomic are slim, as -)reignexchange savings are significantwhen LPG displaceskerosene, and the additionalbenefits of reduced deforestationwhen substitutingfor firewoodare substantial. The risk of an inadequatemarket for the additionalLPG in low, since unsatisfied LPC demand is very large due to its cleanlinessin use and cheaper price relative to kerosene. - 33 -
VII. AGRE0MEETS
7.01 The following agreements were reachedduring negotiations:
With the Government that
(a) it will not later than July 30, 1989 remove all price controls over the distributionand sale of {.PG(para 2.23);
(b) it will stipulate(through BPC) credit periods on accounts receivable by B0C from subsidiariesof BPC as well as by the subsidiariesfrom their customersand further cause BPDB to reduce its arrears to BPC by Tk 50 million per month until these arrears are fully cleared (para 3.04);
(c) it will ensure the appointmentof a General Manager for LP Gas and that this will be a conditionof disbursement(para 3.08);
(d) as a condition of effectiveness,it will ensure the engagement of consultantsfor the desigr.and detailed engineeringof the LPG recovery plant at Kailashtilaand, as a condition of disbursement,it will ensure the establishmentof one or more privatelyowned LPG Storage and Distributioncompanies, on terms and conditionssatisfactory to the Association(para 4.07);
(e) as a conditionof effectiveness,the SubsidiaryLoan Agreements between GOB and ERL, BOGMC, and LP Gas, respectively,will have been executed and the Project Proformasapproved by GOB (para 4.16);
(f) it will ensure the availabilityof necessaryresources to complete the project and meet any cost overruns or shortfall in funds to finance the project (para 4.16);
(g) as a conditionof effectiveness,it will establish,beginning January 31, 1987, a toll processingfee for compensatingERL based on product yield, refining complexityand a reasonable return on inv,:stment,together with yield norms and a system of rewards and penalties (para 5.04); and
(h) it will, as a conditionof disbursement,convert Tk 120 million of ERL's debt owed to the governmentto equity (para 5.06); and
(i) it will review, pending decontrolof LPG prices, at least every 12 months beginningJune 30, 1987, and set the transfer price of LPG from ERL and BOGMC to LP Gas, snd from LP Gas to the marketingcompanies, at a level that will ensure that LP Gas has sufficientinternal cash generationto meet, at the minimum, all its operatingcosts and debt service payments (para 5.10). - 34 -
With ERL that
(a) the appointmentof PMAT will be a conditionof effectiveness (para 4.05);
(b) as a conditionof effectiveness,it will, with the assistance of consultants,establish yield norms for the rehabilitated refinery for differentcrude oils likely to be processed, togetherwith a system of rewards and penalties;
(c) it will submit optimized productionprograms semi-annually during the project implementationperiod, together with a review of the extent to which production targets and norms have been met (para 5.04); and
(d) (i) its long-termdebt/equity ratio will not exceed 65:35 from FY87; (ii) its current ratio will be at least 1.5:1 from FY87; (iii) no dividend will be declared if this would cause its current ratio to fall below 1.5; (iv) it will not incur any additionaldebt if this would cause ERL's debt service coverage in any fiscal year to fall below 1.3; and (v) it will not make any investmentsin fixed assets greater than a total amount of US$5.0 million without prior IDA approval (para 5.06).
With LP Gas that
(a) it will obtain the services of LPG Distributionand Marketing Consultantsto design different componentsand assist in the implementationof the project, as a conditionof disbursement (para 4.08); and
(b) it will review at least once a year and set the price of LPG cylinders to cover procurementcosts, taxes and duties (para 5.11).
With BOGMC, ERL and LP Gas that
(a) they will supply the Associationwith copies of their unaudited financialstatements, including the project accounts,not later than six months after the end of each fiscal year, and not later than nine months after the end of the fiscal year copies of the audited statementstogether with a copy of the report and comments of the Comptrollerand Auditor General (para 3.11).
7.02 Subject to the above agreementsand conditions,the proposed project is suitable for an IDA Credit of US$47 million.
Energy Department November 11, 1986 - 35 - Annex 2-1
Bangladesh: Refinery Modificationand LPGRcovery and Distribution Project
Sectoral Shares in Petroleum Products Consueption a/ ('000 MT)
Comparative Shares (%) 1976 1977 1978 1979 1980 1981 1982 1983 1984 1976 1981 1984 ------___------____-_-_-_-__----_------
Transport 323 371 407 467 5S1 520 436 473 560 31 34 37
Residential/ Cosurcial 338 377 398 392 361 366 303 300 311 3) 24 20
Power 178 171 178 206 245 254 195 246 291 16 17 19
Industry 206 294 304 320 297 274 209 238 214 19 18 14
Agriculture 37 52 71 84 85 102 110 140 150 3 7 10
TOTAL 1,082 1,265 1,358 1,469 1,499 1,516 1,253 1,397 1,526 100 100 100
a/ Including naphtha, jute Oetching oil, lubricants and bitumen.
Source:Bangladesh Petroleum Corporation
Energy Department November 11, 1986 Bongladesh: Refinery ModificatIon and LPG Recovery and Distribution Project
Consumptionof PetroleumProducts, 1976-1984 (1000 T)
1975-1984 1984Share Average in Total Annual 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 Consumption GrowthRate (%) (M)
High Octane BlendingComponent 2.4 2.9 4.0 5,3 6.2 6.9 6.7 5.6 6.3 7.1 0.5 12.6 Motor Spirit 51.4 51.9 55.9 60,8 55.8 49.6 47.8 38.6 42,0 48.6 3.3 -0.6 Jet Petrol 23.8 24.5 26.5 30.5 44,4 50.3 58.2 50.9 54.2 64.0 4.4 11.6 SuperiorKerosene Oil 340.9 337.2 378.0 398.2 384.0 448.1 402.7 324.9 322.2 351.4 24.2 0.3
High Speed DieselOil 246.8 252,5 304.4 334.9 414,6 413.3 511.6 455.2 516.5 595.8 41.0 10.3 Light DieselOil 32.0 23.0 31.0 31.0 32.4 35.2 30.2 22.0 20.6 20.0 1.4 -5.1
Furnace Oil, High Sulfur 352.8 319.9 385,0 423.4 428,6 371.2 331.5 289.0 384.5 359.5 24.7 0.2
Furnace Oil, Low Sulfur 30.6 32,i 36,6 40,3 42.1 40.0 29.8 4,0 - - - -
Liquefled Petroleum Gas - - - 0.7 2,7 4.5 5.0 4.3 6.2 6.9 0.5 47.4 a/
TOTAL 1,080,9 i,044.6 1,221,4 1,325,1 1,410.8 1,419,1 1,423.5 1,194.5 1,352.5 1,453,3 100 a/ For the period1978 to 1984
Source: Bangladesh Petroleum Corporation
N
Energy Department November 11, 1986 Bangladesh:Refinery Modification and LAiORacovery and DistributionProject
PetroleumProducts Demand Projections ('000 mT)
No Growth Low Growth High Growth 1985 1990 1995 2000 % p,a. 1990 1995 2000 % p.a. 1990 1995 2000 3 p.a. (Actual) Growth Growth Growth
Motor Gasoline 55,6 48 51 53 -0.32 52 54 57 0.17 54 62 68 1,35
AvturA(erosene 415.5 427 449 472 +0,85 532 693 905 5,33 638 909 1207 7,37
Diesel/Gas Oil 628.7 622 726 846 2.00 761 1053 1436 5.67 955 1656 2818 10.52
Fuel Oil 394.1 310 328 346 -0.86 331 366 404 0.17 348 403 467 1.14
Others a/ 24.0 29 30 32 0.19 33 42 56 5.81 33 45 59 6.18
1517.9 1436 1584 1749 0.95 1709 2208 2858 4,31 2028 3075 4619 7.77
a/ Others include asphalts, lubricatingoils and LPG; likely increasedconsumption of LPG resultingfrom proposedproject is not reflected,
Energy Department November 11, 1986 - 38 - Annex 2-4
Bangladesh:Refinery Modification and LPG Recoveryand DistributionProject
Sector-wiseConsumption of Kerosene.Diesel and Fuel Oil, 1984/85
TotalFuel SectorShare in Fuel SharesIn Consumption Fuel Consumption TotalProduct$ Fuel Sector ('000mT) (I) Consumption(C)
SKO Residential/Commercial 305 87 (Superior Power 46 13 KeroseneOil) --- 351 100 24
'ISD Power 60 10 (HighSpeed Agriculture 150 25 Diesel)a/ Transport: (376) (63.5) Rail 47 8 Road 226 38 Water 100 17 ForeignBunker 3 0.5 Industry 10 1.5
596 100 41
FOMiS Power 175 47 (FurnaceOil, Industry 171 46 High Sulfur) Transportbl 25 7
371 100 25
a/ LOO (LightDiesel Oil) accountsfor only 2S of totalproducts consumption and is usedmainly in foreignbunkers. b/ Mostlyfor foreignbunkers.
Source:Bangladesh Petroleum Corporation
Energy Department November 11, 1986 - 39 - Annex 2-5 Page 1 of 2
Bangladesh:Refinery Modificationand LPG Recovery and DistributionProject
Review of BPC PetroleumProducts Supply Strategy
1. ERL operationsas well as BPC crude oil and petroleum products supply strategy were extensivelyreviewed by C.E. Lummus, the consultants. The conclusionsthat emerged from their review are:
(a) the refinery operations,given the constraintsof limited manpower and maintenanceprovision, are reasonablywell managed; and
(b) that BPC, by a judiciouschoice of crude oils and a mix of refined products and crude oils, has minimized the cost of petroleum products needed by the country.
2. The mission reviewed critically the procurementand processing of crude oils over the past three years. Although there is a 3overnment-to- government contract between GOB and the Kingdom of Saudi Arabia, BPC has regularly procured crude oils outside this contract as well. Crude oils processed in the past includeTapis, Murban from the UAE, Iraq Basrah, Iranian Light and Arabian Light. The crude oils that have been processedmost are Arabian Light and Murban at ratios that have varied from 70:30 to 50:50 (Arabian Light to Murban). The consultantsin their study, as evident from the graph attached,concluded this to be optimum range and the most suitable crude oil mix.
3. Besides optimizing the crude oil mix, BPC has also taken advantage of the favorablepetroleum product prices that prevailedover the past several years. Here again, the conclusionwas that operating the refinery at around 1 mmTpa was the optimum throughnutlevel.
Energy Department November 11, 1986 ; ''t| _40 - As -$I
''...... ;.1 . -X..X.,
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...... a .... , ~~~~...... __..___.....t._. i_.,.. 1..**._
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3so A ____ _ -_ __ _ .. ~~~~~~~~~~~~~~~~~~~...... __._.
' *-'i- ' '- 320*''-0> - * so -- . ,, . =R~~~~~~~~ LIH ARABIAN...... - 41 - Annex 2-6 Page 1 of 5
BANGLADESH:REFINERY MODIFICATIONAND LPG RECOVERY AND DISTRIBUTIONPROJECT
SUMMARYOF CONSULTANTSSTUDY AND AN ASSESSMENTOF FUTURECRUDE OIL AND PRODUCTPRICING
1. The five-volumeconsultant study by Lummus Crest (U.S.) consisted in a review of several refinery operatingand modificationalternatives ranging from low-cost to more capital intensiveoptions. The principaloptions evaluatedwere: (i) mothballingthe refinery and importingall products; (ii) spiking crude oil while continuing to operate the refinery in its present configuration;(iii) processinglighter crude oils better suited to meet Bangladesh'schanging consumptionpattern; (iv) modificationof the refinery with a visbreaker (VB); (v) modificationof the refinery by revamping the existing hydro-desulfurizerinto a mild hydrocracker(MHC) and adding a visbreaker; (vi) modificationof the refinery with a new visbreakerand a new mild hydrocracker;and (vii) modificationof the refinerywith a full range hydrocracker. The consultantsconcluded that mothballingof the refinery and importingall product requirementswould result in a marginal increase in the cost of acquiringessential petroleumproducts. Similarly,spiking was also rejected as unfavorable,since the primary advantage of reduced transportation costs for refined products is lost in Bangladeshdue to the extra costs involved in lighteringcrude oils. The consultantsconcluded that modificationof the refinery has substantialeconomic merit and that Saudi Arabian Light is the optimal crude oil. The comparativeeconomic merits of differentmodification options are given below:
AverageAnnual Foreign Exchange Savings and CapitalCosts of VariousModification Options (CrudeOil: ArabianLight)
AverageAnnual No. of Years NPV at a/ ForeignExch- Capital to Recover IRR 12%Dis- ange Savings Costs Capital (%) countRate ------(USSMillion)…------
Visbreaker+ RevampedMHC 13.40 20.00 1.49 44.12 48.24 VIsbreaker+ New MHC 18.80 43.66 2,32 3t,.92 53.70 Visbreaker 11.10 15.86 1.42 45.72 40.65 Hydrocracker 25.99 81.41 3.13 23.48 55.38 Hydrocracker+ Visoreaker 30.55 95,94 3.14 23.42 64,87 Visbreaker+ ThermalCracker 9.30 47.82 5.14 13.25 3.05
a/ NPV of incrementalinvestments and savings(losses) of differentoptions compared to operating refinery "as is".
2. IDA has had a critical input in the selectionof the most attractive strategy for modifying the refinery configuration. Its review of the consultants'conclusions was aimed at: (i) identifyingthe least-cost effectivestrategy for Bangladeshbased on forecastsof the future demand for - 42 - Annex 2-6 Page 2 of 5
and price of the various petroleum fractions;and (ii) assessing the Justificationfor the most attractiveoption under various alternativeprice scenariosthat could affect adversely the viabilityof the proposed investment. As mentioned above, full hydrocrackingoptions are expected to yield relativelyhigher net savings than the other less ambitious modification options. However, they would involve considerablyhigher capital costs but only marginallyacceptable rates of return (below 20%)-on the incremental investmentsover the MHC/VB options, making these additionalinvestments very vulnerableto changes in relative product prices. For these reasons, the two hydrocrackingoptions were not consideredany further. In the course of its discussionswith the Government,IDA underscoredthe fact that a similar argument would apply when comparing the new MHC option with the revamped MHC option. The Governmenteventually concurred with IDA's recommendationthat the most attractiveoption was the revamped MHC with visbreaker (returns on revamping the MHC are almost equally as attractiveas on the visbreaker alone). Using the net present value of the cost (NPV) to Bangladeshof meeting its petroleumproduct requirementas a basic criterion for comparison purposes, the suggestedmodification (visbreaker + revamped MHC) is expected to yield savings on the NPV of US$49 million compared to operating the refinery "as is" and of US$111 million compared to mothbaLlingthe refinery.
Review of Some Factors that Affect Refining Economics
A. Supply from OPEC and SingaporeExport Refineries
3. OPEC. With the completionof projects under constructionor firmly committed,the primary distillationcapacity in OPEC countrieswill increase from 5.3 million barrels per calendar day (bpcd) in 1982 to 7.7 million bpcd in 1990. Secondaryconversion capacity will increase from 300,000 bpcd to 820,000 bpcd.
Total crude distillation(CDU) 7,700,000bpcd Total conversioncapacity 820,000 bpcd Conversionas percent of CDU capacity 10.7
4. A substantialpart of the new capacity is being built for domestic demand but most of the new plants in Saudi Arabia, Kuwait, Libya and UAE are export-oriented. The volume of product exports will depend on the domestic consumptionand the utilizationrate of new facilities,which some industry analysts believe would not exceed 70 for crude distillationfacilities due to poor demand for residual fuel oil. However, assuming that these refineries can operate at 85 to 90 percent of design capacity and a modest growth in domestic consumption,a recent internal OECD paper, consideredreliable, estimatesthe followingexport potentialby 1990.
Million Metric Million Tons per annum X bpcd %
Gasoline/Naphtha 22.00 (20.0) 0.51 (23.3) Middle Distillates 24.20 (22.0) 0.50 (22.8) Residual Fuel Oil 63.80 (58.0) 1.18 (53.9)
Total 110.00 (100.0) 2.19 (100.0) - 43 - Annex 2-6 Page 3 of 5
5. OECD estimatesthat about 40% of the above wil be targetted to Western Europe from refineriesin the Red Sea and Arabian Gulf areas. This is partly due to the fact that the Jubail and Yanbu export refineriesare owned 50X by internationaloil companieswhich have been shutting down distillation capacity in Western Europe, and also to the fact that the best netback realizationfor products is likely to be available in European Common Market countries. For the latter reason, a substantialpart of exports from Mediterraneanand North African refineriesare likely to find their natural outlet in the Mediterraneanbasin itself and some in Japan and the Far East and alternativelyin NorthwesternEurope or conceivablyalso on the Eastern Seaboard of the USA.
6. The above representsthe scenario for exports from the Middle East. Undoubtedly,there will be products availableto smaller countries. Bangladeshwill have no difficultyobtaining needed products. Prices will oscillate between spot market prices as at present, and posted prices when supply is tight.
7. Singapore. Outside OPEC, Singapore is likely to be the countrymost likely to influencethe supply balance in South and East Asia. The total installedrefining capacity in Singaporeconsists of 1,096,000 bpcd of atmosphericand 161,400 bpcd of vacuum distillationcapacity, and 105,000 bpcd of thermal and 24,000 bpcd of hydrocrackingfacilities. Singaporehas access to light East Asian crude oils as well as crudes from the Middle East. Typical yield, averaged for all the refineries,resembles the breakdowngiven below (volume X):
LPG 2.8 Naphtha 10.0 Motor gasoline 10.0 Mid-distillates 40.0 Fuel oil 33.2 Refinery fuel/losses 4.0
Total 100.0
8. The current demand for products in Singapore includingbunkers is estimatedas follows (bpcd):
Naphtha 5,000 Gasoline 10,000 Mid-distillates 50,000 Residual fuel oil 120,000 Others 8,000
Total 193,000 _ 44 - Annex 2-6 Page 4 of 5
9. Based on the yield structure,when not exporting fuel oil, the production from the refineries is estimated as follows (bpcd):
LPG 10,100 Gasoline 36,000 Naphtha 369200 Mid-distillates 1459000 Residual fuel oil 120,000 Others 8,700
Total 356,000
10. Singaporewould have, at this low throughput (40% of design), about 95,000 bpcd of mid-distillatesfor export. The demand for mid-distillatesin the region is high, Thailand alone needing about 50,000 bpcd, Philippines, Taiwan, Korea and South Asia over 150,000 bpcd, not counting Japan whose deficits are over 200,000 bpcd and are imported mostly from Singapore,when available. In order to increase the output of middle distillates,Singapore will need to increase throughput,which will also increase the output of fuel oil. While in the medium term Singaporemay be able to supply some of the deficits, in the long term substantialsecondary conversion capacity will be needed to maintain the current level of exports with refineries operatingat around 65% of design.
B. Crude Oil and PetroleumProduct Prices
11. In the face of uncertaintieswith respect to crude oil availability, demand and changing consumptionpatterns, projection of crude oil and product prices over a period as long as 10 to 15 years, which is required in the evaluationof high capital intensiveprojects, fall short of the desired degree of reliability. A working group of World Bank staff from various departmentsanalyzed this problem over a period of severalmonths to develop guidelinesfor estimating the economic value of feed to, and products from, a refinery in the medium and long-term. The group concludedthat estimationof refinerymargins needed to supportnew investmentswould provide a more reliable basis for project evaluation than absolute prices, and that these margins could be used to project product-to-crudeoil price ratios.
12. Productioncosts were developedby the group on the basis of the total feedstockand fixed and variable costs for each conversionfacility required by the industry,allowing an acceptable rate of return on conversion investment,for thermal cracking,fluid catalyticcracking and hydrocracking. Based on industryand demand trends, the refinery of the future is assumed to have either fluid catalytic cracking or hydrocracking units, possibly with some form of thermal cracking unit. The price of distillateproducts has been assumed to be intermediatebetween the cost of productionfrom refinerieswith respectivelya hydrocrackingor a fluid catalyticcracking unit, and the margin between the net weighted average price of products and crude oil. It was further observed that the margin had to be adequate to cover all operationscosts as well as recover the capital and providea reasonable return on the investmentover the project life - 45 - Annex 2-6 Page 5 of S considered. The price projectionsthus obtained were then reviewed against historical inter-r-oductrelationships and adjusted as appropriate. The resulting product-to-crudeoil price ratios are given below:
1982 1985 1990 1995
1. Rotterdam/Caribbean
Premium Casoline/Crude 1.46 1.42 1.41 1.39 Regular Gasoline/Crude 1.40 1.36 1.34 1.33 Naphtha/Crude 1.19 1.13 1.18 1.17 Jet Fuel/Crude 1.40 1.36 1.34 1.33 Kerosene/Crude 1.29 1.28 1.27 1.26 High Speed Diesel/Crude 1.21 1.21 1.27 1.26 Fuel Oil/Crude 0.68 0.67 0.71 0.77
IT. Singapore/Bahrain
Premium Gasoline/Crude 1.51 1.50 1.48 1.42 Regular Gasoline/Crude 1.45 1.44 1.42 1.36 Naphtha/Crude 1.30 1.27 1.26 1.23 Jet Fuel/Crude 1.45 1.44 1.42 1.36 Kerosene/Crude, 1.38 1.36 1.35 1.30 High Speed Diesel/Crude 1.33 1.30 1.29 1.25 Fuel Oil/Crude 0.79 0.71 0.72 0.80
13. These estimates,which were prepared following several months of study, are considereda reasonablereflection of likely long term trends in product relationships. In the short term, the possibility of greater fluctuationin product pricing exists. A major uncertaintyin this area is the influenceof the new export refineries shortly to be brought on-stream in severalOPEC nations as well as the future role of the Singaporerefineries.
Energy Department November 11, 1986 - 46 - Annex 3-1
Bangladesh:Refinery Modificationand LPG Recovery and DistributionProject
BPC Subsidiaries
Ownership Subsidiary Operating Responsibility Structure (%) BPC Other
ERL PetroleumRefining 100% -
Burmah Eastern Co. ProductMarketing 1.35X 98.65% (Other GOB agencies & private investors)
Jamuna Oil Co. ProductMarketing 100%
Meghna PetroleumCo. ProductMarketing 100X -
Eastern Lubricants LubricantsBlending 17.33% 82.67% (Other GOB Blenders Limited and Special Products agencies & private investors)
Asphalt Plant Bitumen Production BPC Project -
LPG Limited LPG Bottling 100% -
Source: BangladeshPetroleum Corporation
Energy Department November 11, 1986 BANGLADESH REFINERYMODIFICATION AND LPG RECOVERY AND DiSrRI8A1ON~ PROJECT Energ SectorOrgontettion
In
MnerasCcL,*zotm Manager Chowficn&f DOCctos Socrd Ctar Boorcl f Dbeclr
Dtrecta~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ad ~-O3~ Finonce~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~i BWNGLADESH REFRNERYMODIFICTION AND LPG RECOVERY AND DiSTRIBUTION PROJECT IMggrrnenaonSchedule
ACWM (MON"10*111II 2131415 6171 S 91411 12 is144 516147148jil 0212 2122 2412517122 529 1203i 32!3I 3153 3a7383,04412 43464 4564 AS
0) PCpOIfltM'lptof Pfo)eC lfl lienyetoltonConsultonftt b* PtoqucltotIIIIIII I I 1iall C) dStelln_t to__ to BidDouMen lllI U) ftpatlon PlOPOIOFS(by b.dde) M- - - |
t) 8dOpenlng Is o Conpoonts/M Ivx L 0) BidEvaluation RetleW by SDC/Bonkc
) SelecDond I) t-ftoct k) AMigmteNlot StaffIto Now FacitItles I) O"WIbTe trttt^iNW Cooftactor imN mn)Ttdeilng at Selecte LocdtonAbrood
0) PlantStlerioBS-
0) Invitaftonto Oid (Or PlatkoAl cotooii
c) Rettew& Selectionof Conhtoctkx
ILKGTMANPOTA1Io* StORAG6
0)SWtatigof LPGUiMitd b) SelectionofCmwatailing Film
C) Sibm4om Ofolrorpmotl~ on toage I Distributoni& N ttWig Plan
RartianI,) s t a
N-) LP tormIIUCi lanim ltet CMI
il) Issueorti I) PFepatlon at PropOraltsIy B.dders ) SelectionatConlaoctoa/Sopttr I
Jaibi Itfiti - 49 - Annex 4-1
Bangladesh:Refinery Modificationand LPG Recovery and DistributionProject
EstimatedSchedule of Disbursement (US$ million)
IDA Fiscal Year Estimated Disbursements Annual Disbursement and Quarter By End of Quarter Cumulative As X of Credit
1987 September 30, 1986 December 31, 1986 5.0 5.0 March 31, 1987 0.2 5,2 June 30, 1987 0.3 5.5 11.7 1988 September 30, 1987 1.7 7.2 December 31, 1987 1.8 9.0 March 31, 1988 2.0 11.0 June 30, 1988 2.1 13.1 16.2 1989 September30, 1988 4.3 17.4 December 31, 1988 4.3 21.7 March 31, 1989 4.3 26.0 June 30, 1989 4.3 30.3 36.6 1990 September30s 1989 2.8 33.1 December 31, 1989 2.8 35.9 March 31, 1990 2.7 38.6 June 30, 1990 2.7 41.3 23.4 1991 September30, 1990 1.0 42.3 December 31, 1990 1.0 43.3 March 31, 1991 0.8 44.1 June 30, 1991 0.8 44.9 7.7 1992 September30, 1991 0.6 45.5 December31, 1991 0.4 45.9 March 31, 1992 0.4 46.3 June 31, 1992 0.4 46.7 3.8 1993 September 30, 1992 0.2 46.9 December 31,1992 0.1 47.0 0.6
Energy Department November 11, 1986 - 50 - ~~~~Annex5-1 - -0 ~ Page 1 of 4
Bangladesh:Refinery Modificationand LPG Recovery and DistributionProject
Eastern Refinery Limited FinancialProjections
FinancialStatements - Assumptions
(1) The processing fee has been reckoned at the equivalentof $1/barrel for FY87, FY88 and FY89 and at $1.35/barrelfrom FY90 onwards.
(2) Bonus on process fuel saved has been maintained in money terms at the same level as in 1984, in view of its insignificancein comparisonto the total processing fee.
(3) Regarding operating costs, comments have been given in paragraph 5.02. Depreciationon the Rehabilitationand Modificationassets has been calculatedon the straightlinebasis with a 10-year life. It is recommendedthat ERL should change the depreciationformula accordingly. For income tax purposes,however, the rates allowed under the income tax law will apply. The breakup for the incremental operatingcosts may be ascertainedfrom the consultants'report on modification.
(4) Interest charges during constructionhave been capitalized. After the assets are commissioned,the interest on loans is charged to P&L account. The credit for Modificationis to cover the foreign exchange costs. The interestrate is 11.5%.
(5) Interest income at 14% is taken into account in respect of cash on hand and in banks on balances held over one year.
(6) The accounts receivable from BPC are on the basis of outstandingsof 180 days, as has been the experienceof ERL.
(7) Insurance-sparesrepresent 'capital'items in stock, which may be required in emergenciesand which in all probabilitywill be used for turnaroundafter 1995.
(8) Workers' profit participationfund - it is assumed that a share in profits will continue to be passed on to workers although the formula may have to be changed.
(9) The capital reserve of Tk 123.6 million up to FY85 is raised to Tk 309.3 million from FY86 to reflect revaluationof fixed assets in operation to be effected as on June 30, 1986. Regarding the amount of Tk 123.6 million mentionedabove, a referenceto it is made in paragraph5.03. When GOB causes the increase in paid-in capital by convertinga part of its loan to equity, the 'CapitalReserve' account to the extent of Tk 123.6 million should, for the purpose of determininglong-term debt-equity ratio, be considered as if it is a 'debt'heading, until there is a resolutionof the pre-independence liability. E1l3- CIWSITE- III BTTEIETUS
(As Is k 6billtation + f0ificatiaoe (Is flhlliamleAp AcTual. il EBTJUT~~~iikiDptakes) 9~Tae xmk ~~~~~~~~ESTINTEDIC"tot 19*5 Tska)
Audited Uneuditad 3983 1984 1985 3986 1987 198 1m9 99 1991 l992 1993 Im 19995
-E------
PrKMessingFee 135.3 123.5 131.5 201.5 260.4 302.3 325.5 461.4 461.4 46.4 461.4 46.4 461.4 Beausan Process Fuel Saving 8.0 7.3 7.3 7.5 7.5 7.5 7.5 7.5 7.5 7.5 7.5 7.5 7.5
Total 143.3 130.8 338.8 209.0 267.9 309.9 3m.0 46.9 468.9 41.9 468.9 441.9 468.9 .. - - - - _ -*------...... _...~-w IP9R8TIUSCOSTS
Salaries, ees 6 belits 32.5 36.7 42.3 43.7 43.7 43.7 43.7 43.7 43.7 43.7 43.7 43.7 43.7 Chesocals 15.I 16.2 19.8 20.5 20.5 20.5 20.5 20.5 20.5 20.5 20.5 20.5 20.5 Stores aad sars 26.3 13.8 14.3 14.8 14.8 14.8 14.8 14.8 14.8 14.8 14.8 14.0 14.8 Utilities L.I 6.3 4.4 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 Inserance 2.8 3.1 4.0 4.3 4.1 4.1 4.1 4.1 4.1 4.1 4.) 4.1 4.1 Depreultion 30.7 29.7 32.6 75.3 103.3 134.2 134.2 177.0 374.t 174.9 174.9 174.9 374.9 Nihsellaneus 4.2 4.7 3.9 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0
lncreantalop cost (rehab& sodif) 6.0 6.0 10.6 29.2 47.8 47.8 47.8 47.8 47.8 47.8 (saint, ins, staf-l------. .... ---- Total 117.7 130.5 121.3 172.9 398.9 236.5 235.1 336.5 314.4 314.4 314.4 334.4 314.4
IERATINSPROFIT 25.6 20.3 17.5 36.3 69.0 93.3 98.0 152.4 154.5 154.5 154.5 154.5 354.5
INTERESTCOAlERES (NET) 3.0 11.7) (4.03 15.3 44.3 52.0 61.1 59.3 110.3 90.3 67.9 42.8 34.7
INCOIIEBEFORE TAXES 22.6 22.0 23.5 20.8 24.7 41.3 36.9 93.3 44.2 64.2 86.1. 111.7 139.8
INCIOETAX 10.0 10.0 30.3 55.9 69.9
NETINCWOE 22.6 12.0 13.5 20.5 24.7 41.3 36.9 93.1 44.2 64.2 86.6 55.9 69.9 .... = :;tt =5-::: :5::: :55 znr .n2=55 555 5=-5 5555 555 55 5n
{ deprration on re.hab t sodaf coaponents included under dereciation in operating cost.
CURRENTRATIO (EICU INS-SPARES) 2.42 3.48 3.26 4.13 5.45 4.37 4.22 3.e3 2.69 2.82 3.05 3.36 3. 0 3.29 N
DEBTTOEOUITY RATIO 78/22 41/59 42/58 47/53 51149 6213S 65135 62/3. 57143 54/46 50/50 45/55 40/60 34/66
RETURNON NET F.A. 0.17 0.14 0.15 0.35 0.13 0.11 0.o0 OL1 0.12 0.13 0.15 0.18 0.23
DEBTSERVICE COVERASE 2.67 2.42 3.53 1.52 2.45 1.38 1.26 1.34 1.43 3.53 ERL- CW'OSUTE- WIL^MM$
IhnIt + Rtobabilatatien* Rofnlathgml (In Itullion Tadtt
1982 33 1984 1985 194 1987 398 1999 1990 19 199l2 I3 1994 1995
A. M
C"rrent Asets
Cim an hand nd in Banok 83.8 85.5 105.5 129.9 131.2 186.4 14.4 116.3 255.4 290.7 3t4.0 423.7 526.5 601.6 Oeposits andprapayots 2.1 3.0 3.3 4.3 4.4 4.4 4.4 4.4 4.4 4.4 4.4 4.4 4.4 4.4 Attcontsreiovablo free BPE 16.6 38.0 58.0 53.5 100.9 130.2 151.1 162.8 230.7 230.7 230.7 230.7 230.7 230.7 Loas d advete, 11.3 8.0 11.3 17.7 18.3 18.3 18.3 18.3 18.3 18.3 10.3 18.3 18.3 19.3 Stt4ks, spar. andchtnicals 83.3 BS.4 91.5 101.0 103.3 124.0 134.3 144.7 155.0 155.0 155.0 155.0 155.0 155.0 Wouirena- Wr"n 103.3 211.B 211.8 211.8 211.8 211.8 211.9 211.8
total CoutentAs,ts 197.1 219.9 269.6 306.4 358.0 463.4 59.9 658.3 875.7 711.0 966.3 1,044.0 1,146.8 1,221.9 ------_------. -- - ...... _ FinedAkets
let fixed assetsin Opation 349.1 154.4 127.2 106.1 35.5 647.9 1,086.6 1,401.1 1,395.9 1,284.1 1,109.2 934.3 759.4 584.5 Capital assetsundwr construction 1.2 11.0 37.0 130.7 233.0 319.9 108.8 63.1 _____ ----- ___ ------_* __ _ -----__ ..._~-~--~~ Total Fited Asets 149.3 155.6 138.2 143.7 516.2 880.9 1,406.5 1,509.9 1,459.0 1,284.1 1,109.2 934.3 759.4 5B4.5 ... ~ ~ ~ ------_- - - . - - .... _ .... --- ..-. _-__
TOTALASSETS 34b.2 375.5 407.8 450.1 974.2 1,344.2 1,966.4 2,168.3 2,334.7 2,195.1 2,075.5 1,979.3 1,906.2 1,806.3 o2=2 2*2 2-2- 22222 ... 2S. 222 2222 2== 222 *22* 22
S. LIB1ILITIESAID SIEIAIIIDIJFRS EUITY
CurrentLiabilities
Currentpwrtion 6f long-tore debt 10.3 61.1 l6.1 61.1 137.2 137.2 137.2 137.2 137.2 126.8 llrersl profit participation fund 0.4 0.4 0.4 0.0 1.1 1.1 1.1 1.1 1.3 1.1 1,1 1.1 1.1 1.1 Accountspayable/other liabilities 73.4 47.9 60.5 73.4 54.3 43.9 4A.0 54.4 62.9 62.8 62.8 62.8 118.6 132.7 Dividendspayable 7.5 34.8 21.8 46.7 46.7 46.7 44.7 46.7 46.7
Total CurrentLiabikitine 81.3 63.1 82.7 74.2 65.7 106.1 108.2 116.6 247.7 247;7 247.7 247.7 303.6 3O;75 ------_ -- -- ... .. -- --- ._...... _ Long-ToreDebt
s68 AlP loan 88.3 101.9 110.1 100.3 82.7 72.3 42.0 51.1 41.3 31.0 20.7 10.3 Rdaab 299.1 507.3 456.5 405.8 355.1 304.4 253.6 202.9 152.2 101.5 Nftdai 167.4 669.6 795.2 760.9 684.8 600.7 532.6 456.5 380.5 Debentures 12.0 12,0 12.0 12.0 12.4 12.4 12.4 .2.4 12.4 12.4 12.4 12.4 12.4 12.4 Suppliers Credit 93.71 Pro-liberation liabilities 13.6 13.6 13.6 13.6 14.1 14.1 34.1 14.1 14.1 14.1 14.1 1I.3 14.1 14.1
Total Lon-TermDebt 207.4 327.5 135.7 125.9 408.8 773.5 1,214.6 1,279.1 1,13.8 13,04.6 909.5 172.3 635.2 508.4
ShareholdnrsEquity t
Paid-in capital 50.0 50.0 50.0 50.0 51.7 91.9 229.5 321.5 405.0 405.8 405.8 405.8 405.8 405. Capital reerwe - 123.6 123.6 123.6 309.3 309.3 309.3 309.3 309.3 S30.3 309.3 309.3 309.3 309.3 ^ RetainedEatuings 7.3 11.3 15.9 27.4 38.8 63.5 104.8 143.7 188.1 185.7 203.2 243.2 252.3 275.6
Total ShareholdersEquity 57.3 184.9 189.4 201.0 399.7 4b4.6 643.6 M.5 903.2 900.7 91B.3 958.2 967.4 990,7
TOTALLIABILITIES AID StURENOLDERSEQU1tY 346.2 375.5 407.8 401.1 874.2 1,344.2 1,966.4 2,168.1 2,334.7 2,195.1 2,075.5 1,978.3 13,06.2 1,806.3 :::22 :s::: ::222::: 22 *2... 22222::::: :::: s: m: =_:, 2=22 .. 222 t22a: -22:e ERL- Cl"INPSITE- STATEIEITS OFSDUCES AlI USES OF FlAWS
(ksIs + Rehabilitation+ Nndificationl (In lillin Takasl
IS6 1397 199 199 190 1 192 IM9 1994 35
SOURtES
NETIlCOiE SEFORE INTEREST 25.9 69.0 9, 99.0 152.4 154.5 154.5 154.5 ".7 54.6 ADD:DEPRECIATION 75.3 101.3 1l; 114.2 177.0 174.9 174.9 174.9 174.9 174.9
INTERNALCASH GENERATION 101.1 170.3 207.5 212.1 329.4 329.4 329.4 329.4 273.6 259.5
LAN BORRI3INSS 249.0 425.7 502.2 125.6 41.9 INCREASEINPAID-UP CAPITAL 40.2 137.6 92.0 94.3
TOTALSOURCES 350.1 636.2 847.3 429.7 455.6 329.4 329.4 329.4 273.6 259.5
USES
INCREASEIP FIXED ASSETS 261.4 465.9 639.8 217.5 126.2 DEBTSERVICE LOANREPAYMENT 10.3 10.3 61.1 61.1 61.1 137.2 137.2 137.2 137.2 137.2 INTERESTPAYNENT 15.3 44.3 52.0 61.1 59.3 110.3 90.3 67.9 42.9 14.7 DIVIDENDSPAID 46.7 46.7 46.7 46.7 46.7 46.7 INCREASE/IDECREASE)INKS CP 62.7 115.7 94.4 90.0 162.4 35.3 55.3 77.7 47.0 61.0
TOTALUSES 349.9 636.2 947.3 429.7 455.6 329.4 329.4 32S.4 273.6 259.5 =__:= ::__:55=5= ::5 :Z= ::::=: C-202:3 C;lWte MCC:
Energy Department November 11. 1986 _54 - Annex 5-2
Bangladesh: Refinery Modification and LPG Recovewy and Distribution Project
. SOC LPGRECUVERY
FIINACIALEVALUATION (MILLIONTAKAS IN 1995PRICESt
1987 1988 19899 199 1991 1992 1993 1994 1995 1996
CAPITALINVESTIENT (9.61 (48.3) (59.7)(62.8J (24.91 (5.1)
INCONE
1LPGSALES (tons) 4,000 5,000 5,000 5,000 5,000 5,000 (a takas) 14.0 17.5 17.5 17.5 17.5 17.S
CONDENSATESALES (tonsi 1,600 2,000 2,000 2,000 2,000 2,000 (astakas) 6.4 9.2 9.4 8.6 8.9 9.1
20.4 25.7 25.9 26.1 26.4 26.6
OPERATINGCOSTS
COSTOF SOURCE GAS (0.3) (0.4) (0.41 (0.4) (0.4) (0.4)
NAt4UFACTURING (7.61 (7.6) (7.6) (7.61 (7.6) (7.6)
(7.91 (9.01 (8.01 (9.0) (8.0) (8.0)
NETCASHFLOI (excluding interest payents) (9.6) (48.3) (59.71(62.8) (12.41 12.6 17.9 18.1 11.4 8.6 22=5 22 223 - 33'_a - U2 3 3 3
lal Plant/gate price of G6: Ti 3503/ton.
(b)Cost of sourcegas - Tk 1.96/mcf.
It) Evaluationincludes isport duties but eicludes taxes.
(dl Capital investmentas apportionedto the project (701loan, 302equity). le)Debt service reaches a mxiiumof 26 milliontakas in FY91 and thereafter decreasesas loan is repaid in installmts comencingfrog that year.
Energy Department November 11, 1986 - 55 - Annex 5-3
Bangladesh:Refinery Modification and LPG Recoveryand DistributionProject
LPG Storage and DistributionComponent FinancialEvaluat ion (MillionTakas in 1985 Prices)
1987 1988 1989 19% I99 1992 1993 19 199 1994
IUVETSI (58.91(124.6) (2M.4) 1173.4) (98.0 (10.4) 2.4
SAE SAXK01S 3,000 3,000 3,000 3,000 3,000 3,00 BOTTLEan S 1000 15,00015,000 I5,000 15,000 15,00
NETREW 120.1 120.1 120.1 120.1 120.1 120.1
WRATIIBCMO MOTIDOMLING (8.91 (3.9) (8.9) W8.9) (0.L (80.9) RETILSTATIOS (0.3) (0.3) (0.31 40.3) 40.3) 40.3) niASPRTATI (1.0) (1.0) (1.0) 1.0) 41.01 (1.0) DISTRIBUTION (14.91(14.91 (14.91(14.91 (14.91 (14.91
NE CAULO (58.91)(124.h) 4210.4) (73.4) 7.0 84.4 97.4 9.0 95.0 95.0 33=32 ::.- s :8:2: 33883 :8:23 38832 38333 ensu3 3a38 33338
FM 10.031
Asutions 11 Sales quantitin and operating costs ar taien fra the KOnouiCaralysis stateomts, andnisting LPGproduction is added, togothr w. correspondingoperating costs. 2)Revenu is calculatedas foliouss at3550 takes/tn fr purchasesfroa 8OU at 7100tahaslton fr purchasesfroa ERM. 3)Euisting invstment in thebottling plant at Chittagongis rovalued(2001) and includedunder inwestent in 1981. 4) Dbt servicereacke a auisu of 72 oillion takas in FY91 and thereaftr decreNSeas loan is repaidin installOents caeeenCing froe that yoU.
Energy Department November 11, 1986 - S6 - Anne5 6-1
BRauladesh: Refiner, Modificatton and LPG Recoverv and Dtistributton Project
ERL Reftnery Modtficattin Component Economic Analvati
(tn millton (SS)
1987 3it 119 I91O 199t 1992 VSt 191l 1995 1116 "I57 t9it t 20Q0 _------...... - ...... --- ...... -_ -- --- .. .. .
CAPITALCM51 (6.01 (11.001 (4.51 t1i.501
I8C8111f8t16D4ERi8i83 COST tl 751 11.711 11.5t1 tl.751 l0.751 t1.751 t1.t5 11.15) 11.75) 11.751 U1.751
ElPDRTREYtiE5M tt411M 1.74 I.80 1.SS4 1. 9 1.95 0.f6 2.02 2.t0 2.Al 2.20 2.26 FtELOIL 112.621 13.W23 13.341tl tWSI 114.151 (16.341 ILt.E1 117141 112.191 t1i.iti (1E.S71
Sl( 2.21 2.27 2.33 2.39 2.45 2.44 2.50 2.58 2.64 2.71 2.79 ISO 19.45 19.60 20.04 20.59 21.15 21 21I.P4 22.33 22.04 23.51 24.15
1L.001 (18.400 14.501 7.1t 8.90 .11 9..38 9.iS 7.45 7.65 7.899 .O9 8".34 8.5 £tnf tnt :stsa -s .t;n Sa 555 ftSt Watm ts:ttas fttve 55553 .S:ttss
ERR 21.0N
hit COE DIL USED- NU LIGHT,1040 tii I PICT VIELOS- EFGREAN A 1FtERtDIFICT1IN iS GIVEt8t COitsLTtIITS 11111 CRIII OIL PRICESAl STRUM */til
1998 1t9 19912 IM 1994 1995 199l I997 199i 199 2000
121.9 t25.4 128.5 132.2 135.8 140.2 143.9 148.3 151.9 154.3 160.7
(lv) PR102UTPRCI itATI6STO iRUltECIL
R8TIOS 19 I"5 "9O 1991 t992 193 1994 I5 t991 I"?7 "8 119 2004
29818A 1.26 1.23 153.6 158.2 1f1.9 tx1.5 171.1 172.5 177.0 182.4 181.9 192.3 t97.7 is 1.42 1.31 173.1 178.3 182.5 187.7 192.9 19.7 195.7 201.7 204.6 212.6 218.i Sft 1.3' L.30 14.6 161.5. 171.5 T78.4 181.4 182,3 187.4 192.3 117.5 293.2 248. HoSt 1.29 1.25 157.3 162.0 165.8 170.5 175.2 175.3 t79.t 195.3 189.9 t95.4 200.9 FO 0.72 0.80 87.8 9C.4 92.5 95.2 93.8 112.2 115.1 118.0 121.5 125.1 1280.
ty) FREG1HttAMI FtiSI9 Dft1S O1AINID SUitRCtEQ FO9 EPD81tS FRM C0ITl0t0t.
Energy Department November 11, 1986 - 57 - Annew f-2 Pake I of 2
Ban,ladesh: Refinery M4odification and LPG Recoverv and D1stributcton Project
RRL Refinery As A Whole !conomic Analysias
1987 1908 1989 9Q0 1991 t992 1993 994 1995 199 ts99 1998 1999 2000
ilVESTRENIS AS IS - ESTIRATED PRESENTVALUE MM3.0 REUAILITATIOM (18.0) (IOOFIEAT1011 (S6.0 (18.O (4.5) (1.51 COPREPAIRS .30) t3.01 (3.0) (3.01 (3,0) (5.0) (S.01 13.0) 13.0)
COSTOF CRUDEOl. (148.9) (710.9) 118491 (187.4) t192.91 1197.3) (202.) 1208.2) 1214.M) 1220.3) (226.9) t232.41 (239.0) (245.6)
PRQCESSINBCOST (3.01 13.3) 13.5) (4.5) (4.5) (4.51 44.5) 14.5) (4.5) 14.5) (4.5) (4.5) (4.5) (4.5)
REFINERY"UEl (2.0) 2.0) (2.)) 12.3S 12.41 (2.6) (2.8) (7.91 13.1) (S.40 13.61 13.8) (4.1) (4.4)
PROOUCTVALUE - ERL 159.49 183.17 197.95 207.04 212.64 217.54 223.65 229.77 237.11 243.23 250.55 256.68 264.02 271.36
NETCASHFLON (31.4) '11.0) 2.9 11.4 12.8 10.2 10.6 11.1 11.6 12.0 12.5 12.9 13.4 13.9 am .Sn:: nasa saa:sa ==:a =====s a== ttn -tt tan =nfl: Int It.:
ASSlTIS
1987 I988 1989 1990 1991 1992 1993 1994 95 (996 1997 (998 1999 2000
(1) CRUOECOARE 0ooo TONS) 1200.00 1300.90 1399 80 1500.00 50000 1500.00 (500.00 1580.00 1500.00 (500.00 500.00 1500.00 150O.00 1500.00
(2) PRODUCTYIELD 1000 TNS)
LPG 10.00 IO.9 11.70 12.10 12.70 12.70 12.70 12.70 12.70 12.70 12.70 12.70 (2.70 12.70 APIITHA 101.60 110.90 1)8.50 114.10 1)4.10 114.10 114.10 114.10 114.10 114.10 114.10 114.10 114.10 114.10 6SO INE 57.20 62.00 66.70 49.00 49.00 49.00 49.00 49.00 49.00 49.00 49.00 49.00 49.00 49.00 KEROSE 357.20 387.00 416.70 344.00 344.00 344.00 344.00 344.00 344.00 34.00 344.00 344.00 344.00 344.00 DIESELOIL 265.90 288.00 310.20 458.00 458.00 458.00 458.00 458.00 458.00 458.00 458.00 458.00 458.00 458.00 FUELOIL 360.50 392.60 424.70 478.00 478.00 478.00 478.00 478.00 478.00 478.00 478.00 478.00 478.00 478.00 OTIER(itummn) 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 NETYIELD 1177.40 1276.40 1373.50 1480.88 1480.80 1480.80 1o0.80 1480.80 1480.80 1460,80 1480.30 1480.80 1480.80 1480.80 PROC.FUEL4LOSS 22.60 24.50 26.30 19.20 (9.20 19.20 19.20 19.20 (9.20 19.20 I9.20 19.20 19.20 19.20 TOTAL 1200.00 1300.90 139.80 (500.00 1500.00 1500.00 (500.00 1500.00 1500.00 (500.00 (500.00 (500.00 1500.00 1500.00
13) CRUDEPRICE Sparen/T 116.07 123.39 124.12 121.92 125.58 128.51 132.17 135.83 140.22 143.30 148.28 (1.94 156.33 16072 14) CRUDEPRICE BOnh/IT 124.07 131.39 132.12 124.92 128.58 131.51 135.17 138.83 143.22 46.88 tSI(.28 154.94 159.33 163.72
(5) CRUDECOST tSMR) 148.88 170.92 184.94 (87.39 192.88 197.27 202.16 208.25 214.84 220.33 226.91 232.40 238.99 245.58 Annex Oi-2 Paile o0 2
RI. efiOnery As 4 Vhole Beonomic Analysis
(in million ITSS>
163 PROOUCTPRICES RArtOtO CRUOEPRICE 9R1990 Y91995 LPS 1.35 1.30 156.69 166.57 167.56 164.60 63.26 167.07 171.82 116.58 182.29 WA1.05 192.76 197.52 203.23 2".94 NAPHTHA 1.26 1.23 146.25 155.47 56.39 153L62t54.47 158017 162.57 161.07 172.48 176.98 182.38 186.88 192.28 m.69 681O1.1E 1.42 1.36 164.B2 175.21 176.25 173.13 10.79 174.18 179.75 184.73 190.70 195.68 201.64 26.63 212.61 218.31 kEOSEW 1.35 1.30 b156.b166.57 167.56 164.60 163.26 167.07 171.8 176.58 192.29 187.05 192.76 197.52 203.23 2M8.9 DIESEL 1.29 t.25 1W9.73159.17 160.11 157.2 156.98 160.64 165.22 I69.79 175.28 179.86 185.8 109.92 19.41 20.90 FUELO1L 0.72 0.80 83.57 8s.84 89.37l 7.7n 100.47 102.8t 105.74 108.67 112.18 It5,11 118.62 121.s5 12.06 128.56 BITUME1N 1.00 1.00 116.07 123.39 12-.12 121.92 125.58 128.51 132.17 135.83 140.22 143.88 148.2B 151.9" 16.33 10.72
(10 FiB VALUEOFERL P01TS
LP6 1.57 1.82 1.9 2.09 2.07 2.12 2.18 2.24 2.32 2.38 2.45 2.51 2.53 2.65 11PHT81 14.86 17.24 L.53 17.53 17.62 18.04 18.55 19.06 19.68 20.19 20.81 21.32 21.94 22.56 6RS011n1 9.43 10.66 11.7b6 9.48 .37 8.56 8.81 9.05 9.34 9.59 9.88 10.13 10.42 10.71 KEROSEE 55.97 64.46 b1.02 56.62 56.16 57.47 59.11 60.74 62.71 64.34 66.31 61.95 69.91 71.81 DIESEL 39.81 45.B4 4.67 72.04 71.90 73.57 15.67 77.16 80.28 82.37 84.89 86.98 89.50 92.01 FUELOIL 30.13 34.88 37.95 41.9 48.02 49.14 50.54 51.94 53.62 55.02 56.70 58.10 59.78 61.46 BITILEW 2.90 3.08 3.10 3.05 3.14 3.21 3.30 3.40 3.50 3.60 3.71 3.80 3.90 4.02
TOTAL1S M)1t1 154.66 118.09 192.60 201.77 201.29 212.12 218.16 224.20 231.45 237.49 244.14 250.78 258.03 265.29
i8) CUNSUlP- tO 312.00 3108.00 3M5O0033.0 338.00 344.00 351.00 359.00 366.00 373.00 180.00 3.40 396.00 4O.00 19) ERLYIELD - FO 360.50 392.60 424.70 478.00 478.00 417.00 478.00 478.00 478.00 470.00 478.00 417.00 478.00 473.00 310) EIPORT- fO 48.50 14.60 99.70 147.00 140.00 134.00 127.00 120.00 112.00 105.00 8.00 98.00 02.00 74.00
(11) FREIGHTADUIIIOM 4.82 4.9B 5.15 5.27 5.35 5.42 5.49 5.57 5.66 5.73 5.81 s.90 s.9 6.00
12) PRODUCTVALUE - ERL 159.49 183.17 197.95 201.04 212.64 217.54 223.65 229.77 237.11 243.23 250.55 256.6 20.02 271.36
113) REFIREYFtIEL OTY- 41000TOIMS OF NAT G8 PRICEITOR 48.64 48.46 51.76 55.27 59.03 63.05 67.33 71.91 76.80 82.03 87.60 93.56 S'.92 lo.1n
Energy Department November 11, 1986 Annex 6-J -59-
Batjladenl. Ref£ineOryModification and lPC; Recovery and Disttibution Proleot
Crule/rrodiwt Price V'afiations . Sh1slapuon (119C761q84)
~~~4,*.~~~~~~~ .
I J~ ~ -, 24--,
s~~~~~~~~~~~~~~~~~~~~~~~~~~~ .p; X F .~ ~~~~~~~~~~~~'r - . p - . - !
~,, 24t ~ ~ I ;- * QCt-
t 21 4 - i 9
2) The compositeproduct price (productslate as would be yie-ldedby ERL after modification)was $161.3/tonin 1976, $137.2/tonin 1978. $311.8/tonin 1981 and $221.7 in 1984.
3) Diesel pricewas $178.4/tonin 1976, $150.8/tonin 1978. $358.1/tonin 1981 and $244.1In t984. Energy Department NOvember 11, 1986 - 60--sem
Bangladesh: RetinerZ Modification and 1LPGRecvery and DistributionProlect
GraPb~ CrudelProduct Ptice Variations at Singapore (1987-2000) (in 1985 USS)
ERL li415E C;4S-E
279
2440
219-
17-
140 ~,.
119 -
190
.n . | ~~~~~I. I I 19e7 1961991 1-993 99' 199 199? YE4Aj ° DRUDE(2IESEL PODQE 7
1) Crude price is taken at 116.1/ton in 1987, 121.9/ton in 1990 and 140.2/ton in 1995 (1985 terms).
2) Compositeproduct price (from a ton of crude oil) per ton io taken at $128.9 in 1987, $134.5 in 1990 and $154.3 In A995.
3) Diesseprice to taken at $149.7/ton in 1987, $157.3 in 1990 and $175.3/ton in 1995.
4) ERR for the vhole refinery is 18% and for the modificatlon component 212. Energy Department November 11, 1986 Aaex 6-5 61 -
Bangladesh:Refinery )bdification a n LPO Recoveryand DistributionProject
GraPh Crude and Prd%ct Pr!ie Variationsat 5nLapore (198j-2000o
(in 1985 US$)
ERL LOER CRUDE OIL PRICE S14ANQ
24tQ561~
228
.17
CL 17('
Ij10 - " -X1 I 2')31
1987 19'9 19411 19 99 1997 199
0 CRUDE 4- DIEPRODU
1) Crude price is taken at $93.0/tonin 1987, $80.2/tonin 1990 and $109.0Gton in 1995 (1985 terms).
2) Compositeproduct price (from a ton of crude oil) per ton to taken at $105.4in 1987, $90.3 in 1990 and $122.2in 1995.
3) Dieselprice to taken at $123.0/tonin 1987, $106.1/tonin 1990 and $139.5/tonin 1995.
4) ERP for the whole refineryis 122 and for the modificationcomponent 152. EnergyDepartment Novezber11, 1986 - 62 An"%o 0~-
Refinery *Ic4iEoctIon f ,ndcLPrC Recovery nold r I t f I h.4 Ion PN c
Fcon-irl Anal. 'ftE Fal laNt,tlie CowMn.,nent
(If,, ',(In IYI trices)
o*; 60s.~~~~~~. Os: 003 25)3 lEt 1015~~~~~~~~~~~~ 1450 .20' il lg0q 2000' 2001i 24D(2 2003 2004-
BEhEFTS [IPSSALES t,> 5..; ¾i 52 51t .; ss t5 5,606 5,00 5,006' 5,000 5,000 1,8000
0(80586ED050L4(00 ttqua. OO ,!' 56 .el .50. 7,510 71,0 71,00 1,50Q 71,30 7.50( 1,500 7.10 7,100 '600 1; ,.5C 4.10 137? !,0!' _400 1,444 1.45, I,'523 1,5i5 1,000 4,0352 1,698 1,744 j,793
CoIlOJsAIt floss ,-5 _ v,L. 2.,.w ,,o:V Ltid i,'& 2.0f)( 2,0001 ",OOv LOW 2.00* 2,000 2,000 t ' ~6 'L 2'S 'oh 204 %03 706 319 32? DS0 4o $5 3us
0u000t.1 .061L .45o [ott' 7,052 .tOE !6 7,05 30 , 1, %e632 1,000 I,3e 1.989 2,044 2,100 2,118
LOSTOF 1110A6I.0BAS. 1 13 .3 Ii .3 .11 13' 73, IIIt liii 1031
006T8118COSTS 0A6ACTUR10610 75 :2 S 5,5 ,sh, 15a. l o ' St., t110 'ISO. 71501 11501 11501 IEP0th00TTLIN6 '45. 45. its '45~ '05 :4' 45 0' 45 5. .4, 1Oi 141 4. 016301801108 .c~~~~~~~~~~~~~~~~~~~~~~~.'A, -..w''20 i s 2,~L' 200. '200. 7200' 1200, 4209. .20 12001 12007
Subtotal ',':'Q: '01' ''N .30S.,305:CaA .19"105 '91305 G51.305; 395)3131 (39113951 135113911 13051395
REI01 U 7401080*2''12u'*. >2.*.* 4 .1 Ii O 1;: 1,3861 1,424 i.4'u i.528 1,581 I,057 1,692 1,750
0760 125 1333.0
ta Lachhousehold uce c,.lnao, I0q- pa. aroW cc tOe aw4'ee. t6) Kerosbne- adjustediur heat ConMer.. cIt 0istrobutiwr- Tt IS9e. t,)lndOr. 'd) (ruoe pfice it S.ogapurePt016-c.10 '¾ lv-'. 7S [II4 1405~ lOOt 10 1990 1999 2000 2001 2002 2002 200
i2.112.10; 151.50 i2i.11 12! 30 4,.2l 1'4.016 108.20 031.00 050.13' 160.73 165.24 1&9.90 174.69 119.62
1 Iie kerosenepUrice 2-33O IX, It !175.24lyaos; Y03 080.0 10'.10 ItS 1 .iu 20O-Q 200.17 214.44 220.3 220.20 222.50 239.00 707 Condensateprice [P1 : 3 :2.04tA: A-:.: 1 1::0l6 004 151.176 7341.030159.328 103.12 160.24 172.90 171.00 102.62 ql1 Natoralgas p',te $Z7a- 24 -Ot.il,.ul 3-1 LoO ta 2.00 3.a0 2.04 2,04 2.h4 2.a4 ZoO 2.04 2.64 2.04 'ISa 70fouctat ealhihaur
Energy Department Novemebr 11, 1986 - 63 - Annex A-7
las ladesh: Refinery 'qa,41ftation *n0 L6PG4Recoverv and iltatrtbnct n Prolect
lcona.tc Analvsis
((100 ISS tn 19A5 vrices)
19S7 190M 1999 tn90 494 1992 t993 19 - 94 1996 14t97 U9IS 4 2000 2eo0 2002 203 2004 .~~~~~~~~~~~~~~~~~~~~~~~------. ._.... ----- , ......
WltitL llFtr ttOt t 1s0F1CIV4t41tit4 t; 4191 4911 41341 4131t 4071 4491 IBITUiS0iUitlltttit BiUWITRO 42090 4 S14 11.199; t4431 4403) 14041 1li0 3 "'0 491*4 t1,3404 15101 ili10 MLItSOIiE R! 437 917 357 77 --- ...... -.------...... ___...... SitO l 4204 tl,4021 42,2031 (1,207, U403 S2 17 ...... _ . _ . _~~~~~~~~~~~~~...... -- - - - ...... -----
UIPS" (PB hSAM lilA 3,000 3,000 3,000 3,000 3,000 1,000 3,000 3,000 3,990 3,000 3,000 3,000 2,000 3,000 WV1 3.S,Q00 0 30 ,000 3,000 3,600 3s,60 1,000 3,004 3,09* 3,000 3,000 S,000 S,00t 3,000 tat. tONS ,000 0,000 0,0O0 6,000 6,000 6,000 6,000 6,000 6,000 0 6,000t ,0QO t.000 0.000
MGM 014t0 S 9,000 9,000 9,000 9,000 9,000 9,00 9,0 9,00 9,000 9,000 9,000 9,000 9.t 9,00V (bfy t000 1,575 t,044 1,655 0,100 l,69Q I,?J3 ,1im ,I07 tjSt7 1,930 1,903 2,037 2,093 2,151
hiote 10o0$1 1,575 1,t11 1,t55 1,700 I,69 1,3m3 1,7it 1,S27 1,819 t,950 1,98 2,037 2.09S 2,151
3T ilF km it414 tl941 42064 i216) 422 t24kl t26,t 1271i4 42954 45141 S3334 3551 3714 402i t1*li# CmlS UoIIIII0 44034 441 10 3400 41034 (403) 41034 44034 41034 4403) 4403) 403 103 4 4403;1103 is 4 am SA1 3 494 494 194 194 (9) 491 494 19) (94 494 494 49 494 (94 ,in1601Ut OP3 4334 4334 1331 (33) (334 4334 US3) 4334 4334 M3 4331 433. 4334 oitsItU 42i04 42004 420) (2M0l 430) 0301 1200) (40 182 0047) 4200; 42004 4290; 42T00 ..-- -- - . - - - - ..... -_- - - - - ...... ,. -- .. - -- _--.-. -i-otal 04253 44251 1425t (4251 l4251 (4254 (4254 404 1425) (4251 04251 44251 4425) 9254 .~~~~~~~~------.. ____... ------at 0U8Lik It 42l02;,204; 11,2071 903 t,074 4,102 4,G57 4,03 1,4062 1,090 1,125 1,159 1,191 1,224 1,257 1,291 4,324
w09 42in 846.36
05 ~~~~15.31
Ee Lghn aold an cylia* VWU,t0. ( Mmusladwi1 rea cirthm. tcl br tu&cost - t0.025Tloa.ll0. I4dl TtOSciudar ad Tk 17600 toobalk. tol L0S0t -td itatomic valueof0 atural as ditc tfu0r busto austo place oL 4.0 t 174t1oirefinmng taItt
1m m1 19'1 4M 49s 1994 1995 199t 1997 4M9 1999 2000 2004 202 20GS *.1 50.5 54.0 57.0 01.5 65.7 70.2 75.0 00.4I 5.5 91.3 97.5 104.2 111.2 443.8 126.9
IOTei Dprnt Nawaber 11, 1986 MAP SEC'ION IBRO 19490R 819- 90 92e B A N G L A D E S H REFINERY MODIFICATION AND LPG RECOVERY f f)&orhar. AND DISTRIBUTION PROJECT
-26' J taur_Proposedt ro (Second Gas Project) 26- Existing
Rangariur VUnder Implernentation
rC KwA.o, D Natutal Gas Discoveries Dira;purX \ \ t _ Primdry Roads
-a-- | iRailroads Rivers
> 8 t- --- Internatiotnal Boundaries
-25 ) I C S -- 25r
aogao< JhJamalpar , _ W,) h -2 ) 1w30Nugaort a ogra Ks t \ ?o S,ktha,l.Kia 5 Mym enin F aea'lbazar
asa. \)shweqa/n:
;-.O->5-~~ ~~~ 5 ur ag abt + Ash.gan 24 Iuri agaa 24-
-24c>, ,~~~~~'''S''ushia- 1 - I N D I A 2-
NI DdOfii.t A ( Jemre 4
Ta.ar. *i~. 3.aaas-ad u Pa,_tuak atra .h
tgIant a' r r Srr aira' 9 > \ A .Ir,atana'ia's tfli,i J ~ ~ ~ uin rnrb v .... ~~~~~~~~~~~~~~~~orPatuzakhdt.. htagtA] F0e rrons S ('D Kutubdia J O 25 5r r. MILES BURMA 21H_ _ _ _' 21C . . O 50 100 KILOMETERS SII LANKA 90 92 90,~~~~~~~~~~~~~~~~~~~~~~~~~~~ 92 S ir