Incentives worth $1.6b approved for new coastal refinery in Balochistan

UAE firm will set up, invest $5b in the 100,000-bpd refinery in Hub

ISLAMABAD: Despite opposition by different ministries, former prime minister Shahid Khaqan Abbasi approved $1.6 billion worth of incentives for UAE-based Abu Dhabi Petroleum Investment Company to encourage it to establish an oil refinery along the coast in Hub with annual production capacity of 100,000 barrels per day (bpd).

The incentives were given on a planned investment of $5 billion in the refinery - a project of Pak Arab Refinery Company (Parco). Such incentives had also been offered to all new state-of-the-art projects.

Earlier, the United Arab Emirates (UAE) government had abandoned the project during the 2008-13 tenure of Pakistan Peoples Party (PPP) government because of a dispute over change of top management at Parco, which is jointly owned by governments of Pakistan and the UAE.



The former premier took the decision at the end of April 2018, just a month ahead of completion of Pakistan Muslim League-Nawaz (PML-N) government's tenure.

However, it surprised members of the Economic Coordination Committee (ECC), chaired by Abbasi, as concessions proposed for the new refinery in a summary prepared by the Petroleum Division were more than those approved for the Khalifa refinery project in Hub in 2007.

In the ECC meeting, Parco executives pointed out that cumulative impact of the incentives sought for the new coastal refinery was estimated at $1.6 billion over 20-year life of the project.

They claimed that the $5-billion investment would give monetary benefits of $84 billion in the shape of foreign currency savings on imports, share in profit for the government of Pakistan and contribution of sales tax and petroleum levy.

Then minister for law and justice emphasised that the UAE company was being offered all types of incentives for establishing the refinery whereas no incentive had been proposed for workers. Being an important part of the refinery, the workers should also be given incentives for motivation, he said.



The minister for commerce stated that he had never seen such type of concessions for a new refinery project including exemption from provisions of the Companies' Profits (Workers Participation) Act 1968 and Workers Welfare Fund Ordinance 1971.

The privatisation secretary was of the view that exemptions proposed for the new refinery were more than those approved for the Khalifa refinery.

The additional petroleum secretary, however, insisted that the proposed package comprised incentives already approved by the ECC in 2007 for the Khalifa coastal refinery.

The incentive package included 20-year income tax holiday, exemption from all duties, taxes, surcharges and levies on imports by project sponsors, contractors or any other persons, of all machinery, vehicles, plant and equipment, other material and spares and consumables for setting up, operation, maintenance and repair of the refinery.

The package also included exemption from withholding tax and all other duties, taxes, surcharges and levies on imports relating to foreign contractors and sub-contractors and their personnel in connection with engineering, procurement, construction, commissioning, operation, maintenance and repair of the refinery.

Sales tax and excise duty on the supply of domestically manufactured building and construction material, equipment and services will also be waived.



According to the incentive package, new refinery projects will be given a pricing mechanism which will be no less favourable than the prevailing mechanism. The new projects will also be facilitated in infrastructure building and installation such as Single Point Mooring, jetties, sub-sea/land pipelines, etc.

The package waives the applicable development surcharge on exports under EPZA Rules 1981 in case the refinery is set up in an export processing zone.

Published in The Express Tribune, July 28^th, 2018.

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