Chinese company readying feasibility for oil refinery in Lahore

ISLAMABAD: The Chinese company has initiated work on the feasibility for setting up deep conversion oil refinery close to Lahore for catering to the upcountry’s needs. The estimated cost of the mega refinery hovers at $6 billion including the construction of the crude oil pipeline from port city to Lahore.

On the sidelines of Boao Economic Forum recently held in the month of April in China and attended by Prime Minister Shahid Khaqaan Abbasi, Pakistan State Oil (PSO) and Power China for the construction of the upcountry deep conversion oil refinery and crude oil pipeline. The project will help reduce the cost of transporting petroleum products via road from refineries in southern areas and also ensure uninterrupted supply.

Pak-China working group on setting up mega project of oil refinery in Lahore has been set up and to this effect Chinese company has started working on the feasibility study. Petroleum Division (Energy Ministry) has written a letter to the government of Punjab asking for the allocation of 1000-1200 acres of land, a senior official told The News.

Keeping in view increasing POL needs after the completion of projects under CPEC umbrella, Pakistan is going to install two mega deep conversion oil refineries one at Lahore and other at Khalifa Point, HUBCO and more importantly the government has asked the existing oil refineries to upgrade. Upcountry refinery to be set close to Lahore and Khalifa Point refinery will produce the POL products at par with the Euro-5 products. The Lahore refinery will be having the capacity to refine 2500,00-300,000 barrels per day.

To a question, the official said that Lahore refinery will be provided the crude oil through a pipeline that will be laid down either from Karachi or from Somiani port, Balochistan. The experts say the laying of pipeline from Somiani will be more feasible and practical as in Karachi, the congestions of pipeline has aggravated.

The official said that this very vital project will be executed under Public Private Partnership (PPP) mode. By 2030, the demand of the petroleum products in upcountry that include Punjab, KPK, and Northern Parts of the country will inflate up to 60 million tons and it is a wakeup call for the existing refineries to upgrade themselves to cater to the future needs of the country.

More importantly, the financial closure of Khalif Point Refinery has also been achieved. Pak-Arab Refinery Company (PARCO) will establish Khalif Point Refinery with a capacity to refine the crude oil up to 300,000 barrels per day.

“The project requires $ 5 billion investment. UAE has allocated the funds,” said the official. The top sources in Ministry of Petroleum and Natural Resources said that refinery will be established at Hub and the land at Gaddani that was earlier given for establishing the 6600 MW coal based power park has been retrieved for the mega refinery and to this effect a wall has been erected showing the demarcation of the land for the proposed refinery.

With shareholding of government of Pakistan at 60 percent and UAE 40 percent, PARCO will set up the refinery. The officials also disclosed that PARCO, which is not deep conversion refinery, is also being expanded by its top management to increase its refining capacity by 25,000 barrels per day to 125,000 BPD from 100,000 BPD. Pakistan currently imports 80 percent petroleum products as the existing refineries in the country have become obsolete which run 40-45 percent of their production capacity. “Now time has come to close down the existing the refineries and initiate the project for setting up new state of art refineries in the country.”

Pakistan currently import oil products of 19.63 million tons per annum that include furnace oil of 6.6 million tons, diesel 2.6 tons, petrol 2.3 tons, jet fuel 0.13 tons, and crude oil 8million tons. The country gets crude oil of 3.85 million tons from within it. And in case the deep conversion refineries one by PARCO and other one at Lahore, then Pakistan dependence on imports of furnace oil (6.6 million tons), diesel (2.6 million tons), petrol (2.3 million tons), jet fuel (0.13 million tons) will be ended as the proposed refineries will provide the required finished and refined petroleum products.

There are 7 Oil refineries with total annual refining capacity of 12.87 million tons out of which 4 are based around Karachi with collective capacity of 6.3 million tons per annum mainly to feed southern and central parts of the country. PARCO being the largest refinery located in the mid country and ARL at Rawalpindi cater for demand in central and northern parts of the country.

For setting up refinery, no permission of government of Pakistan is required and refineries are free to sell their product to any marketing companies or they can set up their own marketing companies. However, license from Ogra is required under Ogra ordinance 2002. The government has also announced the 20-year tax holiday for the refineries to be set up in the future.