ISLAMABAD, June 28: The government will provide 2,000 acres free of cost for setting up a deep conversion grass-root oil refinery at Khalifa Point and allow unlimited import of crude oil without any customs duty.
Petroleum ministry sources told Dawn on Wednesday that the refinery would have the capacity to refine 200,000-300,000 barrels of oil per day at Khalifa Point, near Hub in Balochistan.
The refinery would be given all facilities as per Export Promotion Zone Authority (EPZA) rules. In addition, the land owned by State Petroleum Refining and Petrochemical (Perac) would be provided free of cost and would be used only for a new refinery and not as a government equity.
This 2,000-acre land was purchased by the state-owned Perac in the 1980’s for setting up a refinery in the public sector in collaboration with Iran. However, the project could not materialise due to differences between the two governments over guaranteed rates of return.
However, the sources said the 80/20 rule, which requires export of 80pc of total production to foreign countries, applicable for industrial units established under EPZA rules would stand relaxed for this project.
The Economic Coordination Committee (ECC) of the Cabinet had approved the project at a cost of $2 billion. However, it was kept as a guarded secret that Perac’s land would be provided to the sponsors of the refinery free and crude imports would be duty-free.
The sources said there would be no restriction on import of crude oil. All crude oil imports would be exempt from customs duties and tax. All other incidental charges associated with the import would, however, be applicable.
Moreover, the government would facilitate the installation of supporting infrastructure including Single Point Mooring (SPM), sub-marine pipelines, product pipelines and electric power supply from national grid.
Further, the sales exemption would be allowed on all quantities of petroleum products’ exports while sales tax would be applicable on the products to be marketed locally. The refinery would be commissioned by December 31, 2010.
However, the sponsors would have to design and construct the refinery in accordance with the international code and standards, with the capacity to produce at least 60pc middle distillates.
The company would meet the EURO-III product specifications both for export and local market and would be free to sell surplus products in the international market at internationally competitive prices.
The government would, however, not provide any guarantee for return on investment and the refinery would have to optimise its own operations for reasonable margins.
The refinery would have a maximum refining capacity of 13 million tons of petroleum products - which would be higher than the country’s total existing capacity of 12.8 million tons.
The ministry of petroleum and natural resources would award the project contract to pre-qualified and short-listed companies through international competitive bidding on build, on and operate (BOO) basis, the ECC had decided in April.