ISLAMABAD, March 5: The government has framed rules to facilitate import of three second-hand refineries amid opposition from within the government that the move will discourage investments in new refineries, it is learnt.

Two companies — Coastal Refinery Limited and Indus Refinery Limited — had informed the government that they were in the process of importing second-hand refinery units and the Trans Asia Limited had already been issued a licence for importing second hand refinery, petroleum ministry officials said.

The refinery unit being imported by Coastal is a closed unit of the UAE while Indus has purchased an obsolete unit from Caltex-Chevron and Trans Asia’s unit will come from Italy. All the three will need major refurbishments to comply with Pakistan’s new rules to produce petroleum products of at least Euro-II specifications.

The cabinet committee on investment (CCOI) had decided on July 24, 2000, that the “Ministry of Petroleum and Natural Resources should reframe the guidelines for relocation of complete plants in the oil refining sector and submit the same for consideration of the CCOI in a subsequent meeting”. The ministry, however, did not implement the CCOI decision to “wait for stability in the operational performance of the above refinery, observe experience of second-hand refinery unit before finalisation of recommendations/guidelines”.

The government, said official sources, delayed the rules for seven years to monitor performance of an existing second-hand refinery before allowing other old refineries. That refinery, however, did not perform to the expectations of the government. “The said refinery commenced its operation in September 2003 but it was operating only at 13 per cent of its designed capacity”, conceded the ministry of petroleum. “It has now been able to achieve about 47 per cent of its design throughput due to technical and operational problems being faced by the said refinery”, it further said.

The ministry of industries has strongly opposed the proposal for relocating second-hand refineries on the grounds that these do not guarantee optimal utilisation and need less investment but involve high running and maintenance costs. Also, such units are prone to frequent breakdowns, closure for repair, difficulties in maintaining one generation old technology and will result in interruption in regular flow of production.

Moreover, “the policy of allowing relocation of second-hand refineries is contradictory to government’s recent decision to give additional incentives for setting up new state-of-the-art deep conversion grassroots oil refinery”.