According to the original plan, Tehran was also interested in laying an oil pipeline from its territory to Gwadar to transport crude oil for processing. ILLUSTRATION: JAMAL KHURSHID
ISLAMABAD:
A multi-billion-dollar oil refinery planned to be built by Iran at Gwadar port is facing an uncertain fate as Pakistan government has refused to grant the same incentive to the refinery that was offered to Pak Arab Refinery Limited (Parco).
According to sources, the government had promised a 25% rate of return to Parco, jointly owned by the government of Pakistan and Abu Dhabi, at the time of commissioning the project and the incentive lasted for eight years. However, the same rate of return is not being offered to Iran.
Despite attempts to contact the petroleum secretary, he was not available for comments.
During the tenure of previous government, Iran had agreed to set up the country’s largest oil refinery at Gwadar port costing $4 billion and with a refining capacity of 400,000 barrels per day.
Iranian Oil Minister Rostam Ghasemi, during a trip to Islamabad in February this year, agreed with Pakistan authorities to build the refinery in a joint venture with oil marketing giant Pakistan State Oil (PSO). This was expected to not only meet Pakistan’s refining needs, but also open avenues for China to tap oil supplies.
The refinery was part of an oil complex being built by Iran at the Gwadar port. According to the original plan, Tehran was also interested in laying an oil pipeline from its territory to Gwadar to transport crude oil for processing.
According to a senior government official, China had also come up with a plan to construct oil and gas pipelines from Gwadar under the Pak-China Economic Corridor.
Beijing expressed interest in the oil pipeline under a programme to link Iran with China through oil and gas pipelines.
Earlier, China was interested in joining the Iran-Pakistan gas pipeline project, but did not push ahead with the plan following handover of Gwadar port operations to Singapore Port Authority, an official said. Now that Beijing has taken over control of the port, it is going ahead with different projects including oil and gas pipelines.
Former president Pervez Musharraf had also coined the idea of establishing a trade corridor to meet Beijing’s energy needs and offered help for constructing a strategic oil pipeline from Gwadar to China’s border.
Published in The Express Tribune, September 19th, 2013.
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COMMENTS (13)
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@the Skunk: If I invest $2 million and am expecting a 10% return, I am expecting a return of $200,000 on my investment of $2 million. However, if I have to invest $2 million, of which $1 million only is shown in the books as investments and the remaining $1 million paid off as bribes overseas, I would ask for 20% rate of return on the $1 million shown as investments because I am actually investing $2 million. The end result would be that the government will be manipulating prices and the consumers in Pakistan will be forced to pay a higher price for the end product from the refinery. If it were a mining lease the investing company will be buying the minerals mined at a lower price.
good decision. pak is unnecessarily going out of the way to buy 3-4 times more expensive gas with no return favors from iran. the deal was signed to gain sectarian political support by zardari and to ease dharn pressure by mwm type groups which ended as soon as zardari signed this trap deal. these types of deals should be left on the private sector, if they need gas/oil, they can buy it for use or for distribution.
@Raj - USA: Your comments are interesting. However, with a depreciating currency no investor should accept a sovereign guarantee, especially, from Pakistan. Our economy is almost bust and the exchange rate has touched PRs 107/= to a US Dollar. Furthermore, sovereign guarantees when called, invariably invoke a stay order from the High/Supreme Court(s) and the matter pends indefinitely or goes into arbitration. A 25 percent rate of return buttressed by a sovereign guarantee on an infrastructure project is asking for big future trouble. It's suicide and the investor is living in a fool's paradise. Salams
Sharif has to repay for the hospitality and luxuries he and his family enjoyed during exile....but alas it is at the cost of national interest.....but then in this land of pures who cares about national interest especially the rulers who have always compromised on national interests for their personel gains.
@Raj - USA:
For investments of this type, the IRR has to be around 20-25% considering the high financial risks. Further, in international transactions, the IRR can't be based on Pak rupees. It has to be in hard currencies.
25% rate of return. I am ready to invest to get that kind of guarantee return.
25% rate of return to Abu Dhabi guaranteed by the Government of Pakistan ??????
Who in their right minds would guarantee such a high rate of return? If there is sovereign guarantee the risk is very minimal, unless the investors consider the sovereign guarantee itself as having no value and worthless?
I am not an expert on refinery projects but can safely say that in infrastructure projects like this, even a 10% rate of return is high and attractive, especially when there is a sovereign guarantee not only for capital amount invested but also for a minimum rate of return. However, if the rate of return is guaranteed in Pakistani rupee instead of a foreign currency like USD or Euro, it may make some sense as the investor and the government providing the guarantee may be factoring in the expected depreciation in the value of the local currency.
No fresh water in Gawadar but they are daydreaming about making refineries!
Man, I don't get it what is wrong with our governments. Why do they always seek personal interests rather than national interests. Guess Iran refused to pay kickbacks and there you go, they won't make something that is in the nations interest.
obviouzly nawaz is repaying his maters US and KSA for various favours....national interest be damned
USA - KSA strike again.
USA - KSA strike again.
How the Saudizzz, benefactors of Sherrifzz, can allow it?