The government on Thursday signed a US$1 billion loan agreement with the Islamic Development Bank (IsDB) for the Modernisation and Expansion of the Eastern Refinery Project.

The agreement was signed at the Cabinet Division of the Bangladesh Secretariat in the presence of Prime Minister Tarique Rahman and the IsDB Group President Dr Muhammad Al Jasser, said PM’s Deputy Press Secretary Hasan Shiplu.

The financing will support the construction of the second unit of Eastern Refinery Limited (ERL), Bangladesh’s only state-owned crude oil refinery, in Chattogram.

The project is considered strategically important for reducing the country’s dependence on imported refined petroleum products and strengthening long-term energy security.

The long-delayed Eastern Refinery expansion project has been under consideration for more than a decade.

Once completed, the second unit is expected to significantly increase Bangladesh’s domestic refining capacity and reduce the foreign currency spent on importing refined fuels.

The signing ceremony was held during Dr Al Jasser’s visit to Bangladesh from September 2 to 4.

The IsDB president arrived in Dhaka on Wednesday to lead a high-level delegation and take part in official development programmes.

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

Eastern Refinery was established in Chattogram in 1968. Plans for a second refining unit were first drawn up in 2010, but the project faced repeated delays over financing and implementation.

The expansion is now being pursued as a priority project to boost domestic refining capacity, reduce reliance on imported finished petroleum products and improve Bangladesh’s overall energy security.