Mar 30 - Apr 05, 2009

The $5 billion Khalifa Coastal Refinery (KCR) is back on track in the Hub district of Balochistan, as the Abu Dhabi/Pakistan joint venture partners have returned to restart work on the project after two months. The project was suspended in January due to some technical and political reasons. While Abu Dhabi's International Petroleum Investment Company (IPIC) holds a 74 per cent stake, the stake of Pakistan-Arab Refinery Company (PARCO) is 36 per cent in the project. The joint venture has yet to award a contract with any of the firms, which had submitted bids last October to IPIC for the front-end engineering and design (FEED) contract on the project. Though the project had been announced several years ago, yet it has so far been delayed for various technical reasons.

The KCR project is important for the least developed province, as it will bring huge investment, other socio-economic benefits and create job opportunities for the local people. According to an estimate, the project will provide direct employment to 1,500 professionals and indirect employment to 3,000 semi-skilled and manual laborers. It has been estimated that around 10,000 people will be employed directly or indirectly during construction phase.

In 2007, United Arab Emirates had signed an implementation agreement with Pakistan for establishing a $5 billion refinery at Khalifa Point in the Hub district of Balochistan. Under the deal, Abu Dhabi's International Petroleum Investment Company (IPIC) will set up Khalifa Coastal Refinery (KCR) with a target capacity of refining 200,000 to 300,000 barrels per day (bpd). The company has signed an implementation agreement with Pakistan for the project.

PARCO, the 36 percent stakeholder, is a joint venture between Government of Pakistan (60%) and Abu Dhabi Petroleum Investment (40%). It was incorporated in Pakistan in May 1974, as a public limited Company. Today, PARCO is considered the fulcrum in Pakistan's strategic oil supply and logistics. It has emerged as the strategic fuel supplier to the country. It is actively involved in various facets of oil storage, transportation, refining and marketing of energy products.

The proposed Khalifa refinery would be connected with existing POL distribution network and its petroleum products would be based on 'Euro IV' specifications for improving environmental standards besides, ensuring the products to be easily traded on the international market. It will have operation and maintenance service business for Pakistani companies besides, developing other ancillary and support industry around the refinery complex.

The KCR project is scheduled to be completed by 2012. It will not only help the country meet its local demand but also to export the rest of refined petroleum products. Pakistan's total refining capacity is about 12.5 million tons. Pakistan currently meets over 70 percent of its energy needs from domestic resources and 30 percent needs are met by the import of petroleum products. The country's energy statistics shows that around 50 percent of the need is met by the indigenous gas production and 29 percent by domestic and imported oil and 11 percent by hydro-electricity. Pakistan is largely dependent on oil imports. The country's annual energy requirements are expected to more than double to 177 million tons of oil equivalent by the year 2020 from the current 58 million tons.

Khalifa refinery would be the sixth in the country after National Refinery Limited, Pakistan Refinery Limited, Attock Refinery Limited, Pak-Arab Refinery Limited and Indus Refinery Limited. Pakistan has an installed refining capacity of 12.82 million tons a year from its five refineries. In the year 2006, the refineries produced 11.33 million tons, according to official figures. Pakistan consumes about 15 million tons of oil products annually. Abu Dhabi has already a 40 per cent stake in Pakistan's biggest refinery, the Pak-Arab Refinery at Mehmood Kot in the province of Punjab. The $886 million refinery in Mehmood Kot, also known as Mid Country Refinery (MCR), is based on latest leading edge refining technology and processes. MCR was commissioned in September 2000 at Mehmood Kot in District Muzaffargarh. Total refining capacity is 100,000 BPD or 4.5 million tons / annum representing around 35% of the country's aggregate refining capacity.

Khalifa Coastal Refinery would double Pakistan's refining capacity. Crude oil tankage for the refinery is estimated in the range of 500,000 and 600,000 tons. It would have single-point mooring (SPM) with sub-sea pipeline for crude unloading and product loading operations. The capacity of SPM is expected to handle about 1.5 million tons per month. Under the tax holiday regime, the refinery will get concession of repatriation of all income and capital gains outside Pakistan without any tax liability. It will remain exempted from workers participation fund (WPF) and workers welfare fund (WWF). The development charge of 0.5 percent has also been exempted for 20 years.

By virtue of its geo-strategic location, Gwadar seaport in Balochistan is likely to emerge as a free oil port in the south Asian region. It can serve as the future petroleum and petro-chemical hub of Pakistan meeting the oil transshipment requirements of different countries. That is why, Pakistan needs to enhance its refining capacity and it needs Mega oil refinery projects in its strategically located province of Balochistan.

KCR project was originally planned for Gwadar, but it was later moved to Hub.

This is going to be the second refinery project in the province after China-funded oil refinery project in Gwadar. The oil refinery at Gwadar will have a total capacity to refine 21 million tons of oil per annum. The project will have two components including a petrochemical complex and oil storage. This project alone is estimated to cost about $10 billion. The petroleum products so refined in Gwadar would be would transported to Kashghar on Pakistan's North through a pipeline.

The two refinery projects, one at Gwadar and other at Hub, in coastal Balochistan have their own strategic importance. Both are significantly linked to the Pak-China's mega development plan for setting up an energy corridor. Gwadar port is expected to serve as secure outlet for the Middle East and Central Asia oil and gas supplies through a well defined corridor passing through Pakistan.