Bangladesh to buy oil from Kuwait at higher premium

DHAKA: Bangladesh will import 1.152 million tonnes of oil from Kuwait for consumption over the July-December period by paying a higher premium, a senior energy official said on Saturday. The purchase was proposed by the state-run Bangladesh Petroleum Corporation (BPC), the country's sole importer and distributor of fuel oil, and is likely to be approved by a government purchase committee on Sunday, said Mohammad Mohsin, secretary of government energy and mineral resources division.

"The BPC has agreed to pay a higher premium cost to import diesel, kerosene, jet fuel and petroleum oil," he told Reuters. The BPC annually imports nearly 2.2 million tonnes of refined oil from the state-run Kuwait Petroleum Corporation (KPC), almost 70 percent of total demand for petroleum products. The total demand for refined and crude oil in the country is 3.8 million tonnes.

This time the KPC has raised the premiums of diesel to $6.6 per barrel from $5.4, kerosene and jet fuel to $7.0 from $5.65 and petroleum with high octane to $8.1 from the existing $7.7 per barrel, which will cost Bangladesh in addition nearly 600 million taka ($9 million). This would be the largest hike in premium imposed by the KPC. In the past it used to increase or decrease premiums by 5 to 50 cents, officials said.

The KPC was asking even higher premiums for its oil, Mohsin said. "Their (KPC) demand for premium was more, as at the moment the rate of premium is higher across the world after oil prices had gone abnormally high." Premiums are to be paid on top of actual prices, to cover carrying, insurance and other costs.

During the fiscal year ending on June 30, 2008, Bangladesh's oil consumption fell by about 12 percent to 3.4 million tonnes, largely because of increased use of compressed natural gas (CNG) by the transport sector. "We have imported around 3.4 million tonnes of oil in the current fiscal year, 400,000 tonnes less than the previous year," said Anwarul Karim, chairman of the BPC.