Iran, Pakistan to set up refinery: Agreement signing this month
By Aamir Shafaat Khan
KARACHI, Dec 18: Pakistan and Iran are setting up a joint venture refinery near Karachi, at Hub in Balochistan. An agreement in this regard is to be signed at the end of this month when Iranian President Mohammad Khatami visits Pakistan, authoritative sources told Dawn on Wednesday.
A draft of the proposed agreement has been reportedly prepared by the petroleum and natural resources ministry, which Pakistan’s foreign ministry has dispatched to Tehran seeking Iranian foreign ministry’s prior concurrence before being signed in presence of the top leaders of the two countries.
The visit will be a milestone in the brotherly relations of the two countries after an agreement by the two presidents is signed.
The project, which is now considered as economically viable, has been held in abeyance since 1998 due to lack of political will. However, work on the project can now be taken up at faster pace.
Before the visit of Khatami, a delegation of National Iranian Oil Company (NIOC) was scheduled to arrive in Pakistan in the last week of November to review the current status of the refinery project with reference to the oil sector deregulation and tariff protection, in particular. The delegation could not come to Pakistan owing to Ramazan.
Officials of the NIOC and Pakistan’s petroleum ministry had already held at least four meetings in Pakistan and Tehran to discuss the project.
The NIOC officials had been looking forward for assurance on continuation of petroleum policies and refineries, which the Pakistan government had already extended.
The refinery project was approved by the Economic Coordination Committee (ECC) in September 1998, but failed to make any headway at that time.
As the refinery is planned to be set up at Hub, the Balochistan government has allotted 2,000 acres for the refinery and its residential colony.
In the last meeting held in Tehran, both Pakistani and Iranian sides had agreed on the parameters outlining the assumptions for evaluation of the project in line with those adopted by the financial institutions. The present criteria adopted internationally is to assess the project’s rate of return under 100 per cent equity.
Iran feels that any project showing rate of return (ROR) at less than 15 per cent should not be considered as feasible unless supported by other potentials of the project.
According to production slate, the refinery will be processing six million tons of Iranian heavy crude oil per year at price of $124.79 per ton. The expected yield of basic products are — diesel 3.689 million tons, unlead gasoline 1.1 million tons, naphta 293,000 tons, sulphur 48,763 tons, coke 412,571 tons and LPG 93,000 tons.
The first year capacity utilization is 90 per cent and 100 per cent from remaining life of the project. The project’s economic life has been taken at 25 years. The annual operating cost is estimated at $45 million and the total project cost is estimated at $1.23 billion.
Irani and Pakistani diplomatic sources have sounded very optimistic on the forthcoming visit of Iranian President to Pakistan. Work is already under way on several Memorandums of Understandings (MoUs) in commerce and trade between the two countries.
The issue of cross-border smuggling of petroleum products into Pakistan from Iran will also come under discussion at highest level.
