The latest agreement between UAE and Pakistan is to establish an unprecedented $5 billion oil refinery at Khalifa Point in district Lasbela, on Pakistan's Arabian Sea coast, from across the Gulf.

It is the single biggest direct foreign investment (FDI) in Pakistan's history. Pakistan is happy, too, because when the refinery goes on stream, after meeting the domestic demand, its surplus products will be exported. It will put Pakistan on the map of energy exporting countries.

The refinery is planned to go on stream by December 2012. Islamabad has offered several tax breaks for the Khalia Point refinery. These include a 20-year tax free status. Pakistan has also provided 1,000 acres of land, cost free, to facilitate construction of the project. The location will be developed as a new city with all the necessary infra-structure. The building activity, itself, will generate 10,000 jobs. When the refinery goes on stream it will provide jobs to 1,000 persons.

UAE Energy Minister Mohammad bin Dha'en Al Hamili and the outgoing Prime Minister Shaukat Aziz witnessed signing of the agreement to implement the project. The two described the project as "historic and a milestone," in the fast expanding economic, business and investment relations between UAE and Pakistan.

Aziz said "it is an historic day in the relations between the two countries. The refinery project will be a symbol of friendship and pride between the two nations. The project will further cement the relationship with UAE. It will be the largest refinery in the region, will meet domestic requirements and will be able to export its surplus output." Pakistan is upbeat about the UAE project, as was reflected by Aziz. He said, "today, we culminated a long journey to come to this point." This project speaks for itself that Pakistan's policies of consistency and continuity are the demand of the day.

Hamili said "UAE and Pakistan, both are witnessing economic growth. UAE has already been cooperating in many projects in Pakistan and the latest agreement to establish an oil refinery is another real expansion of those projects and cooperation with this country. Both sides are enjoying excellent relationship. UAE will make more investment in Pakistan which will be beneficial for people of both the countries."

The agreement to build the refinery was signed by IPICIPIC Managing Director Khadem A. Al Qubaisi, and Farrukh Qayyum, Secretary, Pakistani Ministry of Petroleum & Natural Resources.

The agreement between International Petroleum Investment Company (IPIC)International Petroleum Investment Company (IPIC) of Abu Dhabi and Pak-Arab Refinery will establish the refinery with a capacity of 300,000 barrels a day of middle-distillate products that are required in Pakistan, but will leave an exportable surplus of POL products.

It will add 1.4 million tonnes of additional POL storage capacity. The refinery will more than double Pakistan's oil refining capacity. Pakistan has an installed capacity to refine 12.8 million tones annually that means 250,000 barrels per day, contributed by its five existing refineries.

The country uses 15 million tones of POL products a year. With a 7.0 percent plus growth of GDP, the demand for POL products is rising rapidly. It is projected to rise from the current annual consumption of 58 million tonnes to 177 million tonnes of oil equivalent within the next 12 years.

Pak-Arab refinery, is already in operation, for the last several years at Mahmood Kot in Punjab province. Abu Dhabi has a 40 per cent share in it.

The IPICIPIC is expected to have an initial stake of 74 per cent in the new Khalifa Point oil refinery, along with other government entities and companies of UAE. Pak-Arab refinery will have a 26 per cent share in it.

Isalmabad considers establishment of the project as "a symbol of trust of the international investors in Pakistan and the conducive environment, it has created."

Location of the oil refinery at Khalifa Point will include establishment of infrastructure in the shape of Single Mooring point which will handle additional petroleum products in the country. Its location will spur economic activity in a relatively less developed region of Pakistan. On its completion Kahlifa Point area will develop into a new city that will offer all civic amenities and the related infrastructure.

The geo-technical investigation and surveys for the refinery have been completed. The detailed feasibility will be completed by January 2008. The font engineering design will be ready by November, 2008. Its financial close will be completed by March 2009. Award of the construction contract will be made during March, 2009. The completion of the project and its test runs will be done by December 2012.

UAE Energy Minister Hamili, during his stay in Pakistan also discussed his country's investment and economic cooperation plans with President Pervez Musharraf. He briefed the President that the Khalifa Point project will refine 300,000 barrels of oil a day. He also gave details of the equity and other financial details of the project.

Hamili appreciated Islamabad's reform agenda and economic policies which he said, have made Pakistan a destination of choice for foreign investors. Hamili said

"The refinery project is the biggest ever investment made by UAE government. I am confident that UAE will invest more in Pakistan in the future."

President Musharraf said, "huge investments in Pakistan speak of the confidence of foreign investors in this country and its economic policies." He said, "the deep rooted historic, cultural and political relations between the two countries that have continued to grow and strengthen over the years. Such agreements will further bring Pakistan and UAE closer."

Energy continues to be a hot subject and top priority in Pakistan's development and expansion plans. The country has to feed the economy which is moving ahead on a good track. Pakistan and Iran have just finalised a contract for natural gas export and building a transnational gas project called Peace Pipeline. The contract is expected to be signed within a month.

Hojatollah Ghanimifard, Iran's Deputy Minister for this Gas Pipeline Project says "the contents of the Peace Pipeline contract have been finalised and all points, prepared by legal experts of the two sides, have been agreed." The remaining points, he said, which relate to technical issues, will be studied within a month, to make the contract ready for signing by Heads of State of Iran and Pakistan. The project was originally planed to supply Iran natural gas from its Pars fields, both to Pakistan and India, as Iran-Pakistan-India Pipeline (IPI) pipeline.

But India has delayed its decision to join the pipeline, principally on gas pricing to Iran and transit fees to Pakistan. It has also been affected by Washington asking both India and Pakistan not to go ahead with the project as it will provide additional income to Teheran which is being pressured on account of its nuclear programme. But, Islamabad has gone ahead with undertaking the project in view of its rapidly rising energy deficit. Tehran and Islamabad have decided to give India more time to think about it. In case New Delhi decides in favour of joining the project, it can do so later.

Ghanimifard said "the terms and conditions of a contract with India will be exactly the same as with Pakistan. If the Indians are not too late, based on the current market conditions, the pricing terms will not change." But, he said, "Iran has not received, so for, any official decision from New Delhi, indicating whether it has withdrawn from the project."

Farrukh Qayyum, Pakistani Secretary for Petroleum and Natural Resources says, "Islamabad prefers to meet its gas needs through Iran. But, it will study other options in the next stage."

The other option is a transnational gas pipeline from Turkmenistan to Pakistan, via Afghanistan, which could also be extended to India.

Qayyum said, "Given the growth of Pakistani economy and development of local industries, the demand for gas has considerably risen in the country during recent years."

By M. Aftab (ANALYSIS)

© Khaleej Times 2007

 

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