The government has signed a $1 billion financing agreement with the Islamic Development Bank (IsDB) for the modernisation and expansion of Eastern Refinery, the country’s only state-owned crude oil refinery.

The agreement was signed on Thursday (September 3) at the Cabinet Division in Bangladesh Secretariat in the presence of Prime Minister Tarique Rahman and IsDB Group President Dr Muhammad Al Jasser.

The financing will be used to construct the second unit of Eastern Refinery in Chattogram. Once completed, the project is expected to significantly increase the country’s crude oil refining capacity, reduce dependence on imports of refined petroleum products and strengthen long-term energy security.

The expansion project has been under discussion for more than a decade but faced repeated delays due to financing and implementation-related complications. The plan to build the refinery’s second unit was initially taken in 2010.

Eastern Refinery was established in Chattogram in 1968. The new unit is expected to reduce foreign currency spending on imported refined fuels while improving the country’s capacity to meet domestic energy demand.

The IsDB Board of Executive Directors approved $1 billion in financing for the Eastern Refinery modernisation and expansion project at its 367th meeting held in Baku, Azerbaijan, in June.

The agreement was signed during Dr Al Jasser’s visit to Bangladesh from September 2 to 4. The project is now being prioritised as part of efforts to enhance domestic petroleum refining capacity and ensure greater energy security.