The board of directors of Pak Arab Refinery Company (Parco) has decided to sign a ‘participation agreement’ within two weeks to form a company to implement the multi-billion-dollar Khalifa Coastal Refinery project with a refining capacity of 250,000 barrels per day.
The proposed refinery, to be established at a cost of $6 billion in Balochistan, will have the capacity to refine 13 million tons of petroleum products per annum and the government has allotted 1,000 acres of land for the project.
Parco is a joint venture between the Government of Pakistan and the emirate of Abu Dhabi in which Pakistan holds 60 per cent shares while Abu Dhabi has a 40 per cent stake through Abu Dhabi Petroleum Investment Company, a subsidiary of International Petroleum Investment Company (Ipic).
In the Khalifa Refinery, IPIC will have a majority shareholding of 74 per cent while Parco will have a 26 per cent interest.
Sources told The Express Tribune that Parco board, in a meeting held in the United Arab Emirates (UAE) on June 16 and 17, reviewed the progress on Khalifa refinery project. The board members decided to sign a participation agreement to form a company within two weeks to implement the project, sources said, adding that after setting up the company, a contract for engineering, procurement and construction would be awarded.
Ipic suspended work on the refinery in January 2009 due to global recession and a row over management issue with Pakistan. Sources said circular debt had also been the cause for delay in setting up the refinery. Parco has been facing problems in getting dues from Pakistan State Oil (PSO) and therefore has not been able to finance the project.
The government released Rs120 billion to clear the circular debt last month, of which Parco received Rs30 billion. However, the circular debt has again started piling up pressure on the oil and gas sector. IPIC is also concerned about the runaway circular debt, which is hampering Parco’s ability to continue operations.
The Parco board in an earlier meeting held on October 5, 2009 granted approval for initial funding of $500 million for the Khalifa refinery. It also approved immediate release of $13 million to kick off subcontracting work related to the implementation of the project.
Published in The Express Tribune, June 24th, 2011.