IRAN-PAK REFINERY

The fate is in doldrum

By AMANULLAH BASHAR
Sep 15 - 21, 2003

An Iranian high powered team dealing with petroleum sector will soon be visiting Pakistan to discuss about the fate of year-old Pak-Iran Refinery project with an installed refining capacity of 6 million tons a year, it is learnt.Forthcoming visit by Iranian oil experts is crucial especially amidst the rumors that the prolonged Pak-Iran Refinery projects is likely to be shelved as the Iranian counterparts have reportedly expressed their unwillingness in implementation of the project due to what they have said economic unavailability of the project due to low margin.

According to reports, Iran has decided not to be a partner in Pak-Iran Refinery project which had to be built at the coastal line of Balochistan near Hub for which the Government of Pakistan had already allotted a piece of land adjacent to Hub Power Company. The Government of Balochistan had allotted a land of 2000 acres for construction of the proposed project and a residential colony for the refinery workers.The national Iranian Oil company, it is learnt to have decided not to participate in Pak-Iran coastal oil refinery project lying pending for years.

However, so far there has been no announcement regarding shelving of the project by the officials in Pakistan, instead they still believe that the project is intact and may come on the ground. In this respect, Petroleum Refining and Petrochemical Corporation of Pakistan considered the refinery project as viable keeping in view the present and future fuel requirement of the county.On the contrary, the National Iranian Oil Company is reported to have considered the refinery project as unviable due to less refining margin and lower rate of return.

Originally, this joint venture refinery project between Pakistan and Iran was planned to process 6 million tons Iranian heavy crude oil per year at a price of $124.79 per ton. The expected turnover of the basic products of the refinery was diesel 3,689 million tons, unleaded gasoline 1.1 million tons, naphtha 293,000 tons, sulphur 48,763 tons, coke 412.571 tons and LPG 93,000 tons.

It may be recalled that Pak-Iran Refinery project lying pending over the years and other projects like Pak Arab Refinery having an installed capacity of 4.5 million ton per annum which was announced later on has already gone into production. Similarly, a smaller refinery project namely Bosicar with a refining capacity of 32,000 barrel a day is also about to go into production.

REFINING CAPACITY

Currently, Pakistan has a refining capacity of around 11.5 million tons per year if the production of the forthcoming Bosicar Refinery was also added to the existing refining capacity.A break down of the refining capacity shows that at present the PARCO is the largest refining project producing 4.5 million tons per year, the second project in terms of refining capacity is National Refinery which is producing 2.8 million tons, Pakistan Refinery 2.2 million tons, Attock Refinery 1.57 million tons and Dhodak about 0.13 million tons.

In fact, Pakistan is a net importer of around 18 million tons of POL products. If the existing refining capacity of the country was taken into account, there was still room for more refineries and the commercial feasibility in Pakistan.The arrival of a refinery project like Pak-Iran Refinery with a capacity of 6 million ton means that it will not only help becoming self sufficient in POL products

But would also provide a strong base for Naphtha and Hydro cracker plants in Pakistan. According to experts, the Naphtha and Hydro cracker plants would help opening infinite varieties of commercial avenues for generating economic activity in Pakistan.However, some of the experts differ from this point of view with their assessment that since the country has decided to shift its energy interest from oil to gas and coal-based technology for economic reasons, more refinery projects would not be economically feasible for the country.The switching over from oil to gas and other cheaper energy resources is a worldwide phenomenon and according to information so far refineries having capacity of over 135,000 barrel per day have already been closed in different countries.

Economic giants like Japan and Singapore have no more refineries and petrochemical plants. As far as India was concerned, it has already been reached a saturation point in terms of investment in refinery sector. Pakistan, in view of growing demand for energy resources especially for POL products, offers lucrative opportunities to the investors. The demand for plastics and synthetic chemicals was increasing in Pakistan, though at a slower place, yet industrialization was taking place and there is hope for acceleration in the pace of industrialization in the days to come, vehicle population was shooting up and the highway networks were also expanding at a much faster rate in Pakistan.With this back ground and existing gap in supply and demand, offers good opportunities for investment in the oil refining sector.