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PARCO's MCR project

The significant feature of the refinery is that it has not only been completed within the scheduled time, but also within the projected cost

Feb 26 - Mar 04, 2001

General Pervez Musharraf formally inaugurated on Monday the Pak Arab Refinery Limited (PARCO), an 886 million dollar Pakistan Abu Dhabi joint venture known as a mid country refinery (MCR) in district Muzzafargarh which will boost country's capacity to produce petroleum products and effect major saving of the hard earned foreign exchange. With the 4.5 million metric ton annual production capacity (about one lac barrels per day), it will almost double the refinery capacity of the nation. PARCOs pride project will not only meet petroleum products' domestic demand, but will also have some exportable surplus of motor spirit and kerosene. The significant feature of the refinery is that it has not only been completed within the scheduled time, but also within the projected cost.

The inauguration of the refinery undoubtedly marks a major stride in reducing foreign dependence on imported petroleum products, as it will give a new boost to the country's production capacity. The project symbolises the depth of the ties between Pakistan and Abu Dhabi (United Arab Emirates) and will prove a milestone in further expansion of these relations in future. It will result in the saving of foreign exchange for the country due to import substitution, besides generating much needed employment opportunities in the underdeveloped areas of the country. It will streamline the transportation logistics saving about a hundred million dollars annually through import substitution, besides generating about 24 million dollars in taxes, duties and dividends. The project, will accrue other socio-economic benefits for the people of Muzaffargarh and other adjoining areas.

The refinery project was in the air for many years but due to one reason or the other, it could not be implemented. With the announcement of the 1994 Petroleum Policy and the incentives provided therein, and the firm commitment and support provided by each successive government the project has finally seen the light of the day.

The project got underway in 1998-99 and is indicative of the resilience and never-say-die spirit of PARCO. The company hired M/s UOP of USA, a world-renowned Process Licensing Company, for designing and engineering purposes while M/s Babcock Wing Wilkinson (BKW) of UK were hired as Project Management Consultants.

The Supply and Construction contracts were awarded to M/s. Japan Gasoline Company (JGC) and M/s. Marubeni Corporation respectively.

In order to optimise Project Management Cost and to ensure transfer of much needed know-how and technological skills to Pakistani professionals in the field of managing large projects, PARCO management used its foresight to initiate the concept of an Integrated Project Management Team (IPMT). The function of this body was to co-ordinate the implementation of this massive investment in an effective manner, supervising the Engineering, Procurement and Construction activities in order to ensure compliance with the contract requirements. The team comprised of PARCO and AMEC-BKW professional engineers, trained in various engineering disciplines and project management measures.

MCR will surely be a matter of pride and benefit for the people of Pakistan as it has been put up in the last two years despite very heavy odds and economic restrictions on Pakistan. The Refinery is now set for full operations since mid of September 2000, two months ahead of schedule, at Mahmood Kot near Multan and within the budget of US$ 886 million.

The MCR is located adjacent to the PARCO's existing Pipeline Terminal Station at Mahmood Kot on a 700-acre site in proximity to Multan, which is an established commercial and industrial city. An access road has been constructed to connect the Refinery to JIMCO (joint Installation of Marketing Companies).

The total cost of the Refinery is around US$ 886 million. Of this colossal amount, US$ 50 million have been spent on environmental protection measures and US$ 28 million have been spent on buildings and civil works, including the housing complex, hospital, school, refinery, buildings, approach roads, etc.

The successful completion of the project, ahead of schedule and without any cost over-runs, is a testimony to the ingenuity and hard work of the local technical and commercial enterprise, which should be extremely reassuring for any investor or financier of such infrastructure projects.

After commissioning of the MCR, besides Furnace Oil for power plants, the country's requirement for LPG, Motor Gasoline, Kerosene, JP-1 JP-4 and LDO will be met entirely through indigenous production, which is a definite step towards self-sufficiency and self-reliance. Besides, around 300,000 tons of Motor Gasoline will be surplus to the country's requirement. This excess Gasoline will be used to increase export revenues of the country.

Despite all heavy odds in the last couple of years, Pakistani engineers and skilled workers have worked under the supervision of international contractors to complete this mega project. The MCR Project is an evidence of the skill and resilience of Pakistani workers and will go a long way in boosting the confidence of foreign investors in the local talent as 26 local contractors got this unique opportunity to upgrade their skills at national and international levels.

The project has also brought significant socio-economic benefits for the underdeveloped region of Punjab particularly in the district of Muzaffargarh, D.G. Khan, Multan, Layyah etc. and it will continue to reap the rewards as the project goes into full operation. Nearly 10,000 people got employment opportunities during the construction phase and thus got a chance to enhance their skills.

In addition to the production of Petroleum products, the Refinery is expected to become a nucleus for the development of downstream petrochemical units in the area, and it will provide an opportunity for the development of allied industries in the area.

Though the target of self-sufficiency in petroleum products squarely rests on the additional discoveries of oil in the country, yet the Refinery will certainly go a log way in taking Pakistan closer to the target, as it will now be about half way through to meet its 18 million metric tons of the domestic requirements with the operation of the mid-country refinery. The government should, therefore, accord special priority to the search of oil and gas to build the country's energy resources, which play the pivotal role in the socio-economic progress of the society. Pakistan will obviously be in serious trouble in future years without substantial oil discoveries, as pressure will continue to mount on its foreign exchange reserves due to increased imports of petroleum products to meet their rising domestic consumption.