ISLAMABAD: In a major move to boost bilateral cooperation, Iran has agreed to set up a $4 billion oil refinery in Gwadar with an estimated capacity of about 400,000 barrels per day.

Prime Minister’s Adviser on Petroleum and Natural Resources Dr Asim Hussain told Dawn on Wednesday that an understanding to this effect had been reached during a meeting between Iranian delegation led by Oil Minister Rostam Ghasemi and Prime Minister Raja Pervez Ashraf.

An official said a memorandum of understanding for setting up the refinery was expected to be signed during President Asif Ali Zardari’s visit to Tehran on Feb 27.

He said land for the project would be provided to Iran near Gwadar port.

Dr Asim said Pakistan was expected to pay the price of gas to be delivered to it through the Pak-Iran gas pipeline and petroleum products purchased from the proposed refinery in the form of food products, particularly wheat, rice and meat.

He said a technical team would visit Tehran on Thursday to finalise parameters of the MoU on the refinery and settle issues relating to the Pak-Iran gas pipeline.

Earlier, a company owned by the UAE government had committed to set up a refinery at Khalifa Point in Balochistan but backed out for unknown reasons.

Meanwhile, the visiting Iranian delegation met President Asif Ali Zardari to firm up schedule for his visit to Tehran next week.

A statement said President Zardari had highlighted Pakistan’s energy needs and steps taken to meet them. He called for greater connectivity between the two countries and stressed the need for moving forward on the ‘ECO Container Train’ project.

He said that regular operation of the ‘ECO Train’ would lend impetus to cargo and transit facilities between the two countries. The president said Pakistan would welcome technical and financial support from Iran for upgrading the Quetta-Taftan railway track.

Mr Zardari called for improving visa procedure, opening new border posts and removing tariff and non-tariff barriers. He also called for early finalisation of agreement to export of wheat to Iran.

He said Pakistan was examining feasibility of starting direct flights from Quetta and Gilgit to Mashhad and expressed satisfaction over the signing of security cooperation agreement between the two countries. He said enhanced cooperation on border security would help to counter terrorism, cross-border crimes and drugs trade.