The government yesterday signed a $1 billion loan agreement with the Islamic Development Bank (IsDB) to build the second unit of the Eastern Refinery project, the country’s lone crude oil refinery.

The Tk 31,057 crore project will be implemented by the Bangladesh Petroleum Corporation (BPC) and is expected to be complete by November 2030.

Once completed, Eastern Refinery will gain an additional capacity to refine 30 lakh tonnes of crude oil annually, enabling the country to meet around 45-50 percent of its petroleum product demand.

Proper implementation of the project will increase the BPC’s refining capacity from 1.5 million tonnes to 4.5 million tonnes, reduce dependence on imported refined fuel oil and help strengthen energy security, said a press release from the Economic Relations Division.

The IsDB loan has a 20-year repayment period, including a five-year grace period, with an interest rate of SOFR (secured overnight financing rate) plus 1.6 percent, said officials.

The loan agreement was signed at the Cabinet Division of the Bangladesh Secretariat in the presence of Prime Minister Tarique Rahman and IsDB Group President Muhammad Al Jasser.

Plans for a second refining unit for Eastern Refinery were first drawn up in 2010, but the project faced repeated delays over financing and implementation.

According to the annual report of the company for 2018-19, the processing cost of the 53-year-old plant has risen 89 percent in the last decade.

The cost was Tk 630 per tonne in 2009 and it surged to Tk 1,190 per tonne in 2019, it said.

Immediately after the signing ceremony, IsDB Group President Al Jasser called on Tarique and expressed the bank’s commitment to supporting Bangladesh’s development priorities.

Speaking at the ceremony, Tarique described the agreement as a “statement of confidence” by IsDB in Bangladesh.

Bangladesh is increasingly focusing on IsDB and its affiliated institutions as reliable sources of development financing.