PARCO to resume work on $6b Khalifa refinery

UAE had abandoned the project, now it will be completed in 3-5 years

ISLAMABAD: The government has decided to revive the $6-billion Khalifa Coastal Refinery project that was stalled by the United Arab Emirates (UAE), a major stakeholder, during the previous government of Pakistan Peoples Party (PPP).

Under a fresh plan, Pakistan Arab Refinery Limited (Parco) will start work on the Khalifa refinery with a refining capacity of 250,000 barrels per day. In Parco, UAE holds 40% shares whereas the government of Pakistan has a 60% stake.



The UAE government had planned to set up the refinery in the coastal area of Balochistan, but the project was shelved because of a tussle with the PPP government over Managing Director Rasheed Jung. The government wanted to sack the MD whereas the UAE opposed the move.

The other impediment was the mounting circular debt in the energy sector that brought work on the refinery to a halt.

Speaking to media on Thursday evening, Petroleum and Natural Resources Minister Shahid Khaqan Abbasi revealed that the board of directors of Parco had given the go-ahead for executing the project.

“All approvals have been given and this will be the country’s largest refinery which will be completed in three to five years,” he announced.

According to Abbasi, Pakistan is meeting all requirements of petrochemicals through imports, but the Khalifa refinery would produce them in the country.

Pakistan is also a big importer of liquid fuels at it is importing 70% of its petroleum product consumption needs.

Pakistan is the only country that is importing substandard petrol of RON 87 specification. Of late, the government has decided to purchase RON 92 petrol from October this year.

Local refineries will also be upgraded to enable them to mix their products with the imported petrol. This will lead to improvement in the efficiency of car engines and reduce pollution.



Abbasi announced that Euro-2 diesel, which is environmentally-friendly, would be introduced in January next year.

About increase in oil consumption, he said petrol demand grew 23% and diesel sales rose 6% to 7% over the past five years. Power producers were consuming 27% furnace oil and 40% gas.

Hydrocarbon exploration

During the three-year tenure of the PML-N government, 83 oil and gas discoveries have been made. The government had set the target of drilling 94 wells in 2015-16, which, Abbasi said, was crossed as oil and gas companies explored 98 wells despite the plunge in global oil prices.

He revealed that the government had cancelled 16 exploration licences because of delay in work, adding there were plans to invite bids for new exploration blocks.

Though the government was planning to launch a shale pilot project, Abbasi termed shale oil and gas exploration economically unfeasible in the face of low crude oil prices.

The cost of shale drilling was estimated at over $10 per million British thermal units (mmbtu) compared to the imported gas that cost $5-6 per unit, he said.

Abbasi stressed that the country had initiated work on the Turkmenistan-Afghanistan- Pakistan-India (Tapi) pipeline project, but there were some challenges in the way of laying the Iran-Pakistan gas pipeline.



The government is working on spot, medium and long-term LNG supply agreements and two new LNG companies have been set up to operate terminals and handle imports.

Saying that no attention had been paid to enhance the capacity of pipelines, he said gas utilities were now working on jacking up the capacity to handle 1.2 billion cubic feet of gas per day at a cost of Rs140 billion. This project will be completed this year.

Published in The Express Tribune, July 2^nd, 2016.

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