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Pak-Iran Refinery project: Trouble again

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The merger of PERAC into PIDC has raised many eyebrows in the Petroleum

Feb 14 - 20, 2000

The Pak-Iran Refinery project which had developed serious snags in the past and was revived through personal intervention of the Chief Executive General Pervez Musharraf during his last month visit to Tehran is again likely to suffer a serious setback if the decision of the Ministry of Industries to merge PERAC into PIDC is allowed implemented.

The Ministry of Industries, without approval of the Cabinet or the Chief Executive, has decided to merge State Petroleum Refining and Petro Chemical Corporation (PERAC) into Pakistan Industrial Development Corporation (PIDC). The decision which the Ministry seems determined to implement will deprive PERAC of its corporate existence and as a result many upcoming projects to which the Corporation is signatory will go into doldrums The Iran-Pakistan Refinery Ltd (IPRL), a joint venture with National Iranian Oil Company will be the chief victim of the decision to dismantle PERAC. Besides the future of several other organisational components of PERAC has become uncertain. Enar Petrotech Services Pvt. Ltd., Perac Research and Development Foundation (PR&DF), Petroman; and National Tanker Company (NTC) are the four divisions, administrative control of which is yet to be decided.

The decision taken by the Ministry of Industries and its speedy implementation without the approval of the Chief Executive or the Cabinet has raised many eyebrows in the petroleum circles. The wisdom of this decision is being openly questioned. A question is being that if it was necessary to reduce the number of corporations through merger, a dead organisation like PIDC should have been merged into PERAC instead of PERAC being merged into PIDC. It may be recalled that State Petroleum, Refining and Petro-Chemical Corporation (PERAC) set up in 1994 to develop petroleum refining and petro-chemical sector in Pakistan, inherited a small lube refinery which it expanded over the years and this is now the largest petroleum refining complex in Pakistan known as National Refinery Ltd. Comprising two lube refineries, one full refinery and one BTX plant.

This corporation initiated a 6 million-ton capacity Pak-Iran Refinery project which will be largest of its kind in Pakistan. On-again and off-again, this project has not been allowed to be implemented by vested interest who want that Pakistan should continue to import refined petroleum products from the west-controlled refineries in the Middle East. However, through the personal intervention of General Pervez Musharraf this project has now been revived and arrangements are in hand to implement this project in collaboration with Iran.

PERAC already owns 2000 acres of land for Pak-Iran Refinery and has successfully entered into various agreement for its engineering, designing and financing. Any change in the status of the PERAC at this stage can further delay the project if not kill it altogether. The knowledgeable sources in the industry claimed that this is a crude attempt on the part of the vested interests, supported by their colleague in the Government, to derail this project once again.

Pak-Iran Refinery project to be located at Khalifa Point Hub, Balochistan will refine 6 million tons of Iranian heavy crude and its projects will help save 300 million U.S. dollars per annum in foreign exchange. This project will also have a floating port (single point mooring) and will help in reducing congestion at the existing two ports in Karachi. It will create thousands of jobs and help usher in a new era of prosperity in the backward province of Balochistan.

The PERAC has also made arrangements for location of a petro-chmical project based on Naptha, close to Iran-Pak Refinery to produce ethylene — the basic raw-material for plastic industry. Once this project comes up, the country will save some 400 million U.S. dollars per annum in foreign exchange currently being spent on import of granules.

Chief Executive Gen. Pervez Musharraf, at the conclusion of his visit to Iran last month, expressed the hope of broad cooperation in the economic fields between the two countries. Immediately after the Minister for Petroleum and Natural Resources announced the revival of Iran Pak joint venture refinery. He announced that the proposed refinery, having hydro cracker and coke units will help refine imported crude oil from Iran into high speed diesel and coke which will bridge the gap for such fuels in the country. While high speed diesel has multiple use and is in much demand in the country, the production of coke from the refinery and its use in brick klins is an innovative idea which would help reduce dependence eon less environment friendly fuels.

The Ministry of Industries if not stopped from implementing its decision will put the whole project in jeopardy.