OREANDA-NEWS. October 01, 2013. The government would request China to finance setting up of a floating oil handling terminal in the deep sea as it has failed to mobilise funds from the Middle Eastern countries after a year-long effort, officials said.

"We are likely to request the Chinese government for setting up the USD327 million Single Point Mooring (SPM) oil handling terminal in the Bay next week," said an Economic Relations Division (ERD) official.

The installation of the proposed floating oil handling terminal in the deep sea has hit snags because of funding constraints, according to the indications available from the relevant sources.

The government has not yet succeeded in lining up external funds from the potential donors in the Middle East to meet its escalated costs, ERD officials said.

The Islamic Development Bank (IDB) has so far not been able to mobilise the adequate financial support. The Jeddah-based donor had assured providing USD 180 million fund for the project.

The IDB has been looking for the remaining amount of assistance from Saudi Arabia, the United Arab Emirates and some other Middle Eastern countries for about one years, Kazi Shofiqul Azam, an additional secretary of the ERD told the FE.

"But it is yet to be succeeded. So the government has decided to seek the necessary funds from China to set up the floating terminal as soon as possible," he added.

Officials said the cost of the floating terminal has risen to USD 327 million from the earlier estimated USD 129 million after a thorough scrutiny of its costs in the light of the funding in a detailed feasibility study by a German firm.

Earlier, the state-owned Eastern Refinery Limited (ERL) in May 2010 undertook the SPM terminal installation project to check pilferage and ensure efficient handling of imported petroleum.

The terminal installation cost was revised upward considering the need for having a 30-kilometre-long pipeline, in addition to the initially proposed one of 77-kilometre length to send crude oil from offshore Kutubdia Island via Maheskhali to the ERL in Patenga.

The ERL first undertook the development project, based on a feasibility study by a Pakistani consulting firm.

But when the experts raised questions about some aspects of the project in the context of the feasibility study done by the Pakistani firm, the government engaged a German-based firm, ILF Consulting Engineering, to study the details and re-estimate its cost.

The German firm proposed a different route for the SPM pipeline and estimated the cost at a higher level at USD 327 million -- against the initial cost estimate at USD 129 million.

The BPC initiated the project for carrying crude oil from Kutubdia Island to the Eastern Refinery and tackling the problem of oil pilferage as well as reducing the time for supply of oil across the country.

The BPC will not require depending much on other countries for handling imported petroleum oil after the establishment of the terminal, the Energy Division official said.

He also said the BPC would also be able to save funds, between Tk 4.5 billion and Tk 5.0 billion a year by reducing pilferage during transportation of oil and to reach a break-even point within 15 years after the terminal becomes operational.

The terminal will be able to handle 120,000 tonnes of oil per month, officials said.

On the installation of the terminal, the BPC will also be able to lower the oil unloading period to nine days from the existing 21 days from a 20-tonne-capacity lighterage ship, he added.