UAE walks out of $5 billion Coastal Refinery project

[LahoreEstate]

ISLAMABAD: The United Arab Emirates (UAE) government has backed out of an agreement to install a $5 billion Coastal Refinery at Khalifa Point near Hub in Balochistan.

While walking out of the agreement on the project, with the capacity to refine 250,000 barrels of crude oil a day, the UAE has linked the establishment of the giant plant to taking charge of the country’s strategic asset of Parco (Pak-Arab Refinery Company), a senior official confided to The News on Sunday.

An accord on implementation of the Khalifa Coastal Refinery Project had been signed at the Prime Minister House in Islamabad on November 13, 2007. The UAE minister of energy, senior officials from the International Petroleum Investment Company (IPIC), Ministry of Petroleum and Natural Resources and Parco had attended the signing ceremony.

Abandonment of the project has obviously shocked the government, which enjoys robust and cordial relations with the UAE. The development, which took place some three months back, is apparently a knee-jerk reaction to Pakistan’s refusal to hand over Parco to the UAE and offer more shares to the IPIC (International Petroleum Investment Company).

Pakistan has 60 percent equity and the UAE 30 percent in PARCO — located in Mehmood Kot area of Multan. The $886 million country’s largest refinery, capable of purifying 100,000 barrels of oil a day, was commissioned well within its budget and a month ahead of schedule in September 2000. The White Oil Pipeline transports imported oil from Port Qasim to the Pak-Arab Refinery.

The official disclosed the UAE government had sought management and charge of the most strategic asset of the country while evincing keen interest in purchasing more shares of the company. But Pakistan refused to do so. Following the refusal, crude oil prices hit new highs some three months back.

Pakistan’s negative response annoyed the UAE leadership, which later communicated to the government that it would not initiate setting up the $5 billion refinery at Khalifa Point near Hub.

It is pertinent to recall the Abu Dhabi government-owned International Petroleum Investment Company had announced on January 10, 2009 that it had delayed plans to set up a refinery in Pakistan and was reviewing its Fujairah refinery project. The CEO of IPIC told newsmen its board had approved last year plans to build in Pakistan a $5 billion refinery with capacity of refining 250,000 barrels of oil per day (bpd).

Without elaborating, the CEO had said: “We are facing problems in Pakistan. For any decision on the Khalifa Point refinery, both the governments need to sit together to take action. We are delaying the project till we sort out the fundamental issues.”

An investigation by The News of the fundamental issues that triggered differences between the two governments revealed the UAE wanted to grab Parco, threatening to pull out of the refinery at Khalifa Point.

Aware of the project’s importance and keeping in view the annoyance of the UAE government, a high-powered Pakistani delegation, headed by Adviser to Prime Minister on Petroleum Dr Asim Hussain, dashed to Abu Dhabi on Sunday to persuade the UAE government not to abandon the plan just because of a dispute over Parco handover. The three-member team includes Additional Secretary GA Sabri and new acting MD of Parco Feroz.

Asked if the UAE government had tied the establishment of refinery to taking full charge of Parco, Secretary Petroleum Mehmood Saleem Mehmood kept mum. But another official said on condition of anonymity that the IPIC had also demanded an extension for Parco Managing Director Mohammad Rasheed Jung.

The PPP government is learnt to have denied a three-year extension to Jung, who has already been given two extensions, each of three years, after his retirement. “Now he has been replaced with a dedicated and nationalist official to ensure the country’s interests in Parco.”

In response to a question, the official said Jung was no more MD, as the government appointed Dr Asim Hussain, Adviser to the Prime Minister on Petroleum, as Parco chairman on Saturday — a day before the team left for Abu Dhabi to negotiate the issue.

http://www.thenews.com.pk/top_story_detail.asp?Id=19718