While the global prices of crude and refined oil are already very high, the government's makeshift arrangements for importing oil has made cash-strapped BPC's purchase costlier.

For instance, due to delayed 'discharging' operations of crude oil from mother vessel using 'lighterage' (a mode of unloading oil), the BPC is forced to bear a staggering extra cost of $ 8.22 per tonne. This causes the BPC to incur an unnecessary loss of $10.68 million in importing 13 lakh tonnes of crude oil every year.

It means if the BPC buys crude oil at $60 per tonne (up to clearing and forwarding at Chittagong), it actually spends $ 68.22 per tonne including demurrage, lighterage cost and the cost resulting from transit loss.

Moreover, the BPC incurs such losses from import of finished petroleum products. It now imports the finished products in bulk-- 30,000 tonnes. But it cannot bring the mother vessel to jetty for discharging the products due to poor draught. As a result, the BPC is forced to lighter 5000-7000 tonnes, incurring a cost of $ 5000-7000 due to lighterage and transit loss.

At the distribution level of refined petroleum, the BPC loses one percent of it due to pilferage while being transported by coastal tankers.

The globally acceptable transit loss during oil transportation is only 0.1 percent.

Thus, out of 2.2 million tonnes of finished petroleum, over two lakh tonnes are stolen by a nexus of staffs of the coastal tankers and Jamuna, Padma and Meghna-- three of the government's oil distribution subsidiaries, sources say. Jamuna incurs a massive loss from oil distribution while Padma Oil, which is a public-private joint venture, makes good profit doing the same job.

"Policymakers talk a lot about smuggling of petroleum products. But where do the smugglers get them? They get it from the coastal tankers. If the policymakers really mean business, they must stop such pilferage," a top official noted.

Furthermore, the country's petroleum storage facilities built in the early seventies can only maintain fuel inventory for 30 days. This threatens petroleum security and also puts the nation at a disadvantage in purchasing larger quantum of oil when the price is comparatively low.

According to oil industry sources, to meet the domestic oil demand growth of 10 percent a year, the government must follow a policy of upgrading discharging facilities, storage capacity and crude oil refining capacity.

Back in 1971, the country consumed only 150,000-200,000 tonnes of petroleum. The demand shot up to 3.5 million tonnes in 2005-06. Yet, the country's petroleum import, storage and processing infrastructures, which were set up in the early seventies, hardly expanded to meet the growing demand.

Roughly, petroleum related infrastructure grew on make-shift basis, like expanding storage facilities only by 30 percent over the years, which is too inadequate, noted an official.

Demurrage and losses
While unloading imported crude oil from ships from Kutubdia, the BPC invariably pays to the ships a demurrage of $400,000 to half a million dollars for shipment of 100,000 tonnes for delayed discharging, beyond the permissible time of 36 hours.

The BPC pays this because it cannot unload oil within the permissible and penalty-free time of 36 to 42 hours. Due to lack of appropriate port facility, it takes 8 to 10 days to finish the job while paying a demurrage of $50,000 a day. Since this is unavoidable, the BPC calculates the oil import price incorporating this loss by asking 10 days laytime for completion of discharge. The demurrage stands at $4 per tonne.

Again, the BPC bears the extra cost for unloading crude oil, in smaller instalments technically termed as lightering, from the mother ship in smaller ships chartered by Bangladesh Shipping Corporation (BSC).

Lightering adds an extra cost of $4 per tonne of crude oil. In addition, on an average, the BPC loses 350 tonnes of crude oil per 100,000 tonnes of shipment as "ocean loss," adding a loss of another 22 cents per tonne.

The crude-oil carrying ships anchor at Kutubdia as they cannot approach the jetty or any other nearest point of anchorage due to draught problem.

But these lightering and demurrage costs and ocean loss can be avoided by setting up a single mooring system. For unloading crude oil, Bangladesh like any other importing countries must set up a 50 km-long 20-inch diameter oil pipeline in Kutubdia and outer anchorage up to oil mooring. Such a system would make unloading a fast and loss-free process, saving a huge cost.

"As Bangladesh will depend on petroleum import, it must optimise its import facilities to make it as cost-effective as possible. The higher authorities are aware of the importance of having a single mooring sea terminal but never took active interest in it," said one source.

For unloading finished petroleum, the government should consider setting up a 15-km long 10-inch diameter pipeline from outer anchorage to oil mooring. The ships carrying finished petroleum are lighter and they can come within about 10 km of the coast.

The BSC also charges the BPC 2.5 percent address commission on the freight in exchange of chartering ships for it.

The country annually requires 23 lakh tonnes of diesel, 5.2 lakh tonnes of kerosene, 2.5 lakh tonnes of jet fuel and 2.95 lakh tonnes of gasoline. Of this, the Eastern Refinery processes imported crude oil and produces 4 lakh tonnes of diesel, 3.5 lakh tonnes of kerosene, 1 lakh tonnes of jet fuel and 1 lakh tonnes of gasoline.

In other words, import of crude oil represents about one third of the total oil import. Imported finished petroleum is costlier even after the crude is processed into finished product at the country's lone refinery.

Eastern Refinery remains ignored
The Eastern Refinery set up about 35 years ago processes around 13 lakh tonnes of imported crude oil a year and meets nearly one third of the country's needs.

Although over the years, the oil consumption has dramatically increased, the government made no effort to revamp it to increase processing capacity of the refinery to save valuable foreign currency spent on import of finished petroleum products.

Processing cost of crude oil at the refinery is 70 percent cheaper than that in Singapore or other neighbouring countries. If the government installs a new distillation column at the refinery, its processing capacity could rise to 1 lakh barrels a day from 35,000 barrels now.

"The overall oil procurement and refining cost would then come down," an official pointed out.

"As Bangladesh has to depend on oil import, it must try to make its import as cheap as possible and consider a higher inventory to avert sudden energy crisis," he added.