Kuwait wins approval for setting up oil refinery in Balochistan

Published: September 10, 2016
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PSO will also ask Gulf state to extend the time frame for oil import credit facility. PHOTO: REUTERS

PSO will also ask Gulf state to extend the time frame for oil import credit facility. PHOTO: REUTERS

ISLAMABAD: Economic managers of Pakistan have given the go-ahead to Kuwait Petroleum Corporation for setting up an oil refinery in the coastal area of Balochistan – a welcome investment initiative for the largely under-developed province, which will reduce the need for import of refined petroleum products in the country.

The Economic Coordination Committee (ECC), the highest economic decision-making body, took the decision in a meeting held on September 7 in response to Kuwait Petroleum’s interest in pouring capital into setting up a refinery in Balochistan, said an official aware of developments.

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The ECC also decided to seek an extension in the timeframe for oil import credit facility from three to four months in an effort to ease pressure on the country’s foreign currency reserves. It directed Pakistan State Oil (PSO), the state oil marketing giant, to try and persuade Kuwait Petroleum to extend the existing credit facility from 90 to 120 days or even more.

In another decision, the ECC permitted import of furnace oil and jet fuel from Kuwait without resorting to competitive bidding. At present, PSO imports diesel from the Gulf Arab state on 90-day deferred payment.

A representative of the Ministry of Petroleum and Natural Resources, who was present in the ECC huddle, said before the year 2000, Pakistan purchased diesel from Kuwait under a long-term contract with the Gulf state’s government.

However, in the wake of market deregulation, Pakistan government in 2001-02 asked PSO to enter into a fuel supply contract with Kuwait Petroleum. Immediately after that, the two sides inked an agreement for the sale and purchase of high-speed diesel only with payment guarantees from the government of Pakistan. Now, this agreement has been in place for the last around 15 years.

Earlier, Kuwait Petroleum had expressed interest in exporting furnace oil and jet fuel as part of the existing arrangement and was looking to install an oil refinery in the coastal area of Balochistan with storage facilities.

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“Pakistan and Kuwait have an old bilateral relationship in terms of oil trade and Kuwait Petroleum is a time-tested supplier, well-reputed for the most economical supplies, product quality and supply security,” an official told the ECC meeting.

The Ministry of Petroleum and PSO suggested that furnace oil and jet fuel could be included in the existing sale and purchase contract by making an addition to it.

This could be done by invoking rule-5 of the Public Procurement Regulatory Authority (PPRA) Rules 2004, which provides for waiving mandatory public procurement procedures in case of an international or inter-governmental commitment of the federal government.

The ministry took up the matter with the PPRA and Law and Justice Division for legal advice.

Later, the PPRA endorsed the proposal. The Law Division, on its part, pointed out that the contract was linked with the agreement between Pakistan government and Kuwait Petroleum and new products could be added. Therefore, it would be treated and read as an integral part of the existing contract.

After examining the proposal from legal point of view, the Law Division cleared it subject to meeting all formalities.

Published in The Express Tribune, September 10th, 2016.

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Reader Comments (11)

  • Virkaul
    Sep 10, 2016 - 10:03AM

    The heading suggests that kuwait wants to construct a refinery in Balochistan but there are no details of the project such as location, throughput, product slate, type of processing units the refinery would employ, where will the products be sold, TIC, schedule, etc. These are supposed to key information of any grass roots refinery. Instead, the report concentrates on import of petroleum products like jet fuel and fuel oil. Who the hell imports fuel oil these days?Recommend

  • SYED
    Sep 10, 2016 - 10:13AM

    Kuwait has ban all types of Pakistani visa since last 6 years. Even a husband cannot sponsor his wife and children on visit visa to Kuwait. Pakistan Govt should sort these basic issues on side lines of petroleum contracts. Recommend

  • Adnan
    Sep 10, 2016 - 10:44AM

    Dear Economic Managers of Pakistan, pls first convince the Brotherly Country, Kuwait to at least start issuing Work and Visit visas for Pakistan!!!!Recommend

  • Sarah
    Sep 10, 2016 - 11:05AM

    @SYED:
    You are so right. My fiance works in Kuwait and it’s really sad that I won’t be able to move in with him after getting marriedRecommend

  • Zulfiqar
    Sep 10, 2016 - 5:36PM

    Kuwait has banned visas for Pakistanis since 6 years and Pakistanis call them brotherly country. Kuwait never banned visas for Indians even though Indians population is more than Kuwaiti nationals now. We request to the elite rulers of Pakistani government to approach Kuwaiti government to lift ban on visas for Pakistanis. At least Pakistan should have Foreign Minister who can handle this issue.Recommend

  • Salman
    Sep 10, 2016 - 5:46PM

    No wonder Indians are jealous of this news. Recommend

  • Shuaib
    Sep 10, 2016 - 6:26PM

    Will it be owned and run by Kuwait Petroleum? I think that would be better? Also it will allow us to export refined crude oil in the international market to the world and to China as well.Recommend

  • Saad
    Sep 10, 2016 - 6:42PM

    Morever they call pakistan brotherly country only because of pakistan nuclear power and its big armyRecommend

  • BrainBro
    Sep 10, 2016 - 7:42PM

    How pathetic and low of both the Pakistani government and the private businessmen involved in the deal. They know Pakistanis are banned in Kuwait and they do not want to maintain any relations with us, yet we run around to lick their boots.
    What would be funny would be that all the bureaucrats involved in the deal would NOT be able to visit Kuwait once they retire.
    Pakistanis have lost ALL self respect.Recommend

  • Saeed Masood
    Sep 10, 2016 - 8:08PM

    First of all this is a very good news…At this stage Pakistan should make renewed special
    programme to bring all the oils countries and States in focus and bring in their major investments to Pakistan. Due to the fall in the oil prices these countries are looking for good investment opportunities.Recommend

  • Y Malik
    Sep 10, 2016 - 10:41PM

    Have we managed to open work permits opened in exchange for Pakistani labor and white collar staff? Recommend

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