ISLAMABAD: Claiming that Pakistan will have surplus gas and power by 2017, Petroleum Minister Shahid Khaqan Abbasi said the government had decided to revive the $5 billion Khalifa Coastal Oil Refinery stalled during the PPP government after a company owned by the UAE government walked out.
He told journalists that Pak-Arab Refinery Company Ltd (Parco) would start setting up the 250,000 barrels per day deep-conversion modern refinery at Khalifa Point in Balochistan’s Lasbela district from its reserved money and chip in private investors to complete the project. It will take three to five years to complete.
The minister said a similar refinery was required to be set up in mid-country to meet the demand in upcountry and export market in neighbouring countries. The government was considering various proposals for setting up the second refinery, he added.
The UAE government had nominated International Petroleum Investment Company Limited (IPIC) to set up the Khalifa Coastal Refinery project in collaboration with Parco after 2000, but later gave up the plan. The plan originally envisaged 76 per cent sharing by IPIC and 24pc by Parco.
Khaqan Abbasi claims country will have surplus gas, power by 2017
Khaqan Abbasi said Parco would now take the initiative. “All approvals have been made; the board (of directors of Parco) has approved it,” he said without elaborating the project’s funding structure.
The UAE holds 40pc share and Pakistan 60pc in Parco.
“This will be the country’s largest refinery,” the minister said, adding that Pakistan was importing 100pc petrochemicals and this refinery would produce them in the country. He said the government was working on a strategic direction shift to importing crude oil, instead of finished products, to ensure fuel security for which storages would be required. “It’s better to import crude and refine required end-products of our choice, instead of looking for shipments for various end-products.”
At present Pakistan is importing more than 70pc petroleum products, most of them unique in the world, and the Khalifa refinery would help address the issue of energy scarcity.
Mr Abbasi said Pakistan was also a big importer of liquid fuel and importing substandard 87RON petrol, which was being mixed with Naptha or something else to meet Pakistan-specific product. He said the government had now decided to import and market 92RON in October.
He said local refineries would be upgraded to enable them to improve products by mixing them with imported petrol. It will result in better efficiency of car engines and reduction in carbon emissions.
The minister said Euro-2 diesel would be introduced in January next year, adding that petrol consumption grew by 23pc and diesel by 6-7pc over the past five years.
Oil, gas discoveries
Mr Abbasi said that 83 oil and gas discoveries had been made since the PML-N government came to power and the government had exceeded its own target of drilling 94 wells this year by drilling 98 wells despite a decline in investment in the petroleum sector because of lower oil prices.
He said the government had cancelled 16 exploration licences due to non-performance and would now sell them along with fresh bids for new blocks. He said the government was also working on a shale pilot project to establish its price economics even through shale development was not economically feasible at present because of lower oil prices.
The minister said the cost of shale drilling was over $10 per MMBTU against the price of imported gas at $5-6 per unit.
He said gas supply had been increased but 0.3 million new consumers had been added to the system. With the completion of ongoing LNG projects and pipelines, Pakistan would have surplus gas in 2017, he claimed.
He said the government was working on spot, medium- and long-term LNG supply agreements and two new LNG companies had been set up to handle LNG terminals and imports. He said that no focus had been given on capacity augmentation of pipelines and gas utilities were working on enhancing capacity to handle 1.2bcfd gas at a cost of Rs140bn.
The project will complete this year.
He said LNG would replace diesel in the power sector as the former was cheaper by 30-35pc, but ultimately the government would phase out furnace oil in the power sector and replace it with LNG.
Published in Dawn, July 2nd, 2016