Monday June 05, 2023

PRL expansion plan hits snag on dollar shortage

February 07, 2023

KARACHI: Pakistan Refinery Limited’s (PRL) expansion project has hit a snag on account of dollar shortage, which delayed the payment to Wood Group UK Limited (Wood), The News learnt on Monday.

Around $25 million are to be paid to Wood for the refinery expansion and upgrade project (REUP), but the payment could not be made for the last several months due to scarcity of dollars in the country, sources disclosed. For the payment of contract to a foreign firm, the contract is registered with the central bank and the payment is made through the central bank after the local company deposits the amount in the bank.

Sources said that dollar shortage has been causing the delay in the payment of the UK contractor engaged for front end engineering design (FEED).

PRL management has also confirmed the delay in payment to its UK contractor. “Yes, there is delay in payment of contract,” confirmed Zahid Mir, Chief Executive Officer (CEP) PRL. However, he hastened to add that efforts were underway to resolve the issue as the contractor was in contact with the Pakistan government through the British High Commission in Pakistan. He hoped that the matter would be resolved soon.

PRL and U-based Wood Group signed the accord in May last year when the former appointed the later as FEED contractor for refinery expansion and upgrade project.

FEED includes basic engineering that is carried out after the completion of the conceptual design or feasibility study. At this stage, before the start of the engineering, procurement and construction (EPC), various studies are undertaken to figure out the technicalities along with an estimated investment cost.

Pakistan State Oil (PSO) fully supports the expansion of PRL as the majority shareholder. The expansion would further increase and strengthen the synergies between PSO and PRL. The project would also contribute towards the country’s balance of payment through import substitution, PRL believed.

This project entails doubling the crude processing capacity from 50,000 barrels per day to 100,000 barrels per day and upgrading the refinery from hydro skimming to deep conversion.

This would significantly reduce the production of high sulphur furnace oil (HSFO) and maximise the production of environment friendly EURO V standard premium products such as high-speed diesel (HSD) and motor spirit (MS/Petrol).

The upgraded complex would also produce propylene, a valuable feed stock for petrochemicals. Project cost, currently estimated at approximate $1,200 million, would be finalised at the completion of FEED followed by award of the EPC contract.

The government of Pakistan has been pursuing an energy plan, under which local refineries are encouraged to expand and improve their crude processing capacities to reduce the country’s reliance on imported petroleum products and save the precious foreign exchange reserves of the country.