Bangladesh has approved a financing package worth $1.004 billion from the Islamic Development Bank (IsDB) for the expansion of Eastern Refinery Limited (ERL), marking one of the country’s largest investments in petroleum infrastructure.
The project is expected to significantly increase domestic refining capacity, strengthen energy security and reduce reliance on imported refined fuel.
The funding was approved on 8 July 2026 by the Standing Committee on Non-Concessional Loan (SCNCL), chaired by Finance and Planning Adviser Amir Khosru Mahmud Chowdhury.
The investment will support the construction of the ERL-2 facility, which will raise Bangladesh’s annual crude oil refining capacity from 1.5 million tonnes to 4.5 million tonnes.
Officials believe the expansion will improve the country’s ability to meet growing fuel demand while lowering the need to import refined petroleum products.
The revised cost of the project has been set at Tk31,000.57 crore. Of this amount, the government will provide Tk18,566.74 crore, while the Bangladesh Petroleum Corporation (BPC) will contribute Tk12,433.83 crore from its own funds.
The project is scheduled to run from January 2025 to June 2030, with the financing agreement expected to be signed in mid-August 2026.
Once completed, the new refinery is expected to produce approximately 1.1 million tonnes of Euro-5 diesel, 600,000 tonnes of Euro-5 petrol, 500,000 tonnes of jet fuel, 400,000 tonnes of furnace oil, 200,000 tonnes of lube base oil, and 60,000 tonnes of liquefied petroleum gas (LPG) each year.
The expansion will also enable fuel from the existing refinery to be upgraded to Euro-5 environmental standards, supporting cleaner fuel use across the country.
Bangladesh currently depends on imports for around 80% of its refined petroleum products, making the country vulnerable to international price fluctuations and supply disruptions. By increasing local refining capacity, the government expects to reduce foreign exchange spending on fuel imports, ease pressure on fuel subsidies and improve the stability of domestic fuel supplies.
A stronger refining sector is also expected to benefit electricity generation, transport, manufacturing and export logistics. Industries with high energy demand, including the textile and garment sector, are likely to gain from a more reliable supply of petroleum products.
If delivered on schedule, the ERL-2 project will become the largest refinery expansion in Bangladesh’s history and a major step towards strengthening the country’s downstream petroleum industry.
The government sees the investment as part of its broader strategy to improve long-term energy resilience while reducing dependence on imported refined fuel.
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