PSO in talks with Power China for new refinery project

KARACHI: State-run Pakistan State Oil (PSO) is in talks with Power China for a partnership in an estimated $8 billion refining project in the country, industry officials said on Wednesday.

An agreement is expected to be signed ‘very soon’, said an official, however, he had no firm details on the particulars of the agreement.

Prime Minister Khaqqan Abbasi witnessed the signing of memorandum of understanding (MoU) between PSO and Power China for the construction of up-country deep conversion oil refinery and laying of crude oil pipeline during a visit at the Boao Forum recently.

The refinery would likely have a capacity of 250,000 barrels/day (bpd) to 300,000 bpd/day.

Officials said the projects aim to supply uninterrupted crude oil and finished products in Punjab, Khyber Pakhtunkhwa and other parts of the country.

Moreover, the pipeline has been designed to avert accidents and maintain smooth supply to other installed refineries.

“The installation of the refinery in Pakistan would be a good omen for us as nearly 70 percent of the needs of petroleum products have been met through imports,” said analyst Abdul Azeem at Spectrum Securities.

“It would strengthen the earnings of PSO, and in addition would help reduce the volume of the import bill for petroleum products.”

Currently, the country has five refineries having combined capacity of around 404,000bpd.

Analyst Tahir Abbas of Arif Habib Limited said the signed MoU is a non-binding document, “it is yet to see when the project would materialise”. “But the new refinery should have latest technology and produce less furnace oil.”

Currently, the refineries in Pakistan are producing around 25 percent to 40 percent of furnace oil from their product mix, which has resulted in colossal sufferings following a government decision to close down power plants running on furnace oil back in November 2017. Moreover, reliance on furnace oil going forward is expected to reduce significantly as Pakistan has invested huge amounts in alternate and cheap sources of power generation, including coal- and RLNG-based power plants.