Eastern refinery set for major expansion
As Bangladesh grapples with persistent fuel and power supply pressures and remains heavily dependent on imported petroleum products, a long-delayed plan to modernise and expand the country’s only crude oil refinery is finally moving ahead, with more than $1 billion in financing from the Islamic Development Bank (IsDB).
The Jeddah-based development lender signed a financing agreement with the Bangladesh government on Thursday for the “Modernization and Expansion of Eastern Refinery in Bangladesh” project, which is expected to treble the refining capacity of Eastern Refinery Limited, the country’s main crude oil processing facility.
The project is expected to strengthen domestic fuel supply, reduce dependence on imported refined petroleum products and ease pressure on foreign exchange reserves by allowing Bangladesh to process a larger share of its crude oil domestically.
Dr Md Mizanur Rahman, additional secretary of the Economic Relations Division (ERD), signed the agreement on behalf of Bangladesh, while Anasse Aissami, director general of Country Programs at the IsDB, signed for the lender.
Prime Minister Tarique Rahman and IsDB Group Chairman Dr Muhammad Al Jasser attended the signing ceremony.
The ERD said the project would be implemented by Bangladesh Petroleum Corporation (BPC) under the Energy and Mineral Resources Division.
Once completed, the expansion will raise Eastern Refinery’s annual refining capacity to 4.5 million metric tonnes from the current 1.5 million tonnes, effectively tripling its capacity.
The government expects the project to increase the country’s fuel supply capacity, strengthen energy security and enable production of Euro-5 standard petroleum products, which have lower sulphur content and meet more stringent environmental standards.
Bangladesh currently relies significantly on imports to meet domestic demand for refined petroleum products.
Greater domestic refining capacity would allow the country to reduce those imports, conserve foreign currency and provide greater stability to the domestic fuel supply chain.
The expansion comes as Bangladesh faces broader energy-sector challenges, including shortages of fuel and electricity and continued pressure on foreign exchange resources.
Increasing domestic refining capacity is therefore seen as an important component of efforts to improve energy security and reduce exposure to volatility in international energy markets.
Largest IsDB project in Bangladesh
The ERD said the financing represents the largest single-project investment by the IsDB in Bangladesh to date, marking a significant expansion of the development partnership between the two sides.
The IsDB, one of Bangladesh’s key multilateral development partners, has previously supported the country through grants, project financing, trade finance, private-sector funding and export credit guarantees.
Following the signing, IsDB Group Chairman Al Jasser paid a courtesy call on Prime Minister Tarique Rahman and reaffirmed the bank’s commitment to supporting Bangladesh’s development priorities.
During the meeting, Tarique stressed the importance of securing concessional financing and assured the government’s full cooperation in strengthening Bangladesh’s partnership with the IsDB.
The refinery expansion is expected to have implications beyond the petroleum sector, particularly by reducing Bangladesh’s exposure to imported refined fuel at a time when energy costs and foreign exchange constraints remain key challenges for the economy.
By increasing the country’s ability to process crude oil domestically, the project could also provide greater predictability in fuel supply and help strengthen the resilience of Bangladesh’s wider energy system.
