ISLAMABAD, Aug 7: The European Investment Bank (EIB) has approved a loan of Rs2.8 billion (Euro44 million) to Pak-Arab Refinery Limited (Parco) for the construction of a pipeline to transport refined petroleum from Karachi to Mehmoodkot near Multan.

The 15-year loan is extendible for five years and will contribute around 10 per cent of the total cost of the project. The 782-km pipeline will be built by Parco’s joint venture Pak Arab Pipeline Company (PAPCO).

It is aimed at meeting the growing demand for oil products. The loan is guaranteed by the federal government, which is backed by the European Union budgetary guarantee.

Parco’s existing Karachi to Mehmoodkot (KMK) pipeline cannot be further expanded. Parco competed and won an international tender to implement the new pipeline on build-own-operate (BOO) basis.

The project is designed to transport imported and locally refined petroleum products from the oil jetty at Port Qasim, Karachi to Mehmoodkot, where the refined petroleum products will be received in storage tanks and transferred to the existing facility and to the Parco’s pipeline to Machike.

The project includes a pumping and terminal station at Bin Qasim with pipeline connection to the oil jetty unloading system, a 26-inch diameter pipeline from Bin Qasim to a terminal station near Mehmoodkot and an intermediate terminal and pumping station at Shikarpur.

The pipeline construction started in early 2003 and the commercial operation is scheduled to start in August 2004.

Following the EIB’s recommendations and changes of the environmental impact assessment (EIA) regulations, the Parco has hired an independent consultant to undertake the additional environmental analysis required to arrive at a comprehensive final EIA, as would be appropriate in the EU.

An independent environmental auditor has been appointed to verify compliance with the environmental management plan during the project’s implementation.