Abu Dhabi likely to invest $1b in oil storages, pipeline

Crown prince is arriving today; total package for Pakistan may rise to $7.2b

Zafar Bhutta January 06, 2019

ISLAMABAD: Pakistan and Abu Dhabi are likely to sign a deal for investment of $1 billion by the emirate in setting up oil storages at Gwadar Port and laying a white oil pipeline during visit of Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed Al-Nahyan beginning on Sunday.

Sources told The Express Tribune that the United Arab Emirates (UAE) had agreed to invest $1 billion through Mubadala, a global investment company. With this capital injection, the total UAE assistance and investment package for Pakistan will rise to $7.2 billion. It also includes a $3.2-billion oil credit facility and $3 billion in cash support for balance of payments.

Pakistan hopes to secure $3.2b oil credit facility

Abu Dhabi has already invested in Pak Arab Refinery (Parco) in joint-venture partnership with Pakistan government and it is the largest oil refinery in Pakistan. Parco is also setting up a coastal oil refinery in Balochistan and is seeking financing for pouring capital into the project.

However, Pakistan’s government is looking for funding for oil storage and white oil pipeline projects.

Officials revealed that during negotiations with Abu Dhabi authorities in the UAE, Pakistan accorded priority to establishing oil storage facilities at Gwadar Port and building a white oil pipeline between Sheikhupura and Peshawar.

Abu Dhabi agreed to invest in these two projects but Parco management was lobbying to divert the funding to its new coastal refinery project in Balochistan.

The Economic Coordination Committee (ECC) has already approved a tariff for the white oil pipeline. The ECC was told that the quoted composite tariff was about 60% lower than the present trucking rate. It would lead to savings of Rs100 billion for the national exchequer, bring the cost down for oil consumers and reduce the number of accidents involving oil tankers.

In the past, some oil tankers had met fatal accidents in which hundreds were killed and these could be avoided in future after the laying of the white oil pipeline, which would provide a safe and efficient way for the supply of petroleum products.

Oil tanker owners had also staged strikes in the past by stopping oil supply across the country, sparking widespread concerns. They have also been allegedly involved in oil theft at different depots of Pakistan State Oil (PSO) and power plants.

Abu Dhabi crown prince to arrive in Pakistan on January 6

At present, Pakistan has inadequate oil storage facilities. It has 59 oil marketing companies but only PSO and Shell have storages for petrol and diesel in order to meet any emergency situation.

Officials were of the view that economic activities in Gwadar would swell with the passage of time where the building of oil storages would be a key requirement. The importance of oil tanks grows further, according to the officials, when plans for setting up some refineries in Gwadar are taken into consideration.

Published in The Express Tribune, January 6th, 2019.

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