Sinosure to finance $1bn expansion project for Pakistan Refinery Limited

KARACHI: China Export & Credit Insurance Corporation, known as Sinosure, has expressed its willingness to finance $1 billion for the expansion project of Pakistan Refinery Limited (PRL).The Chinese company made this commitment during the recent visit of Petroleum Minister Musadik Malik to China, where he was accompanied by officials from the government and private sectors, including representatives from PRL.

Sinosure is a state-funded, policy-oriented insurance company established to promote China’s foreign economic and trade development. It finances projects on behalf of Chinese banks to cover non-payment risks.

The Refinery Expansion & Upgrade Project (REUP) is a major initiative for PRL, aimed at doubling the refinery’s crude processing capacity from 50,000 barrels per day (bpd) to 100,000 bpd. This expansion will include the adoption of a state-of-the-art deep conversion refinery configuration, with an estimated project cost of $1.7 billion.

Sources indicated that Sinosure has assured financing for the project after conducting due diligence and appointing an engineering, procurement, construction and finance (EPCF) contractor. While the funding will come from Chinese banks, China’s law prohibits them from financing directly; thus, Sinosure will provide financing on their behalf to minimize financial risks.

Once due diligence is completed and the EPCF contractor is appointed, Sinosure is expected to extend financing to PRL.Upon completion, the upgraded refinery will utilize advanced technology to meet stringent environmental standards, including the production of EURO V standard fuels, significantly enhancing PRL’s operational efficiency and environmental footprint.

The Refinery Expansion & Upgrade Project represents a substantial investment in Pakistan’s energy infrastructure. By doubling capacity, producing value-added products and adhering to international environmental standards -- such as producing EURO V compliant motor spirit (MS) and high-speed diesel (HSD) -- PRL aims to strengthen its position in the global energy market and contribute significantly to the country's economic growth, the company stated a few months ago.

The upgrade of local refineries is mandated under the brownfield refinery policy; however, upgrade agreements have been pending due to the exemption of sales tax on petroleum products in this fiscal year’s finance bill. A parliamentary panel recently observed that the future of local refineries hinges on their ability to upgrade. “Without upgrading, these refineries have no future,” the panel chief said, accusing local refineries of producing substandard fuel that contributes to health issues such as cancer and asthma.