KARACHI: Indus Refinery Limited (IRL) has failed to reach financial close because banks are susceptible about financing projects in Pakistan amidst terrorist attacks and political turmoil, the company’s CEO Sohail Shamsi told The News on Friday.
This has led to a year’s delay in completion of the 93,000 barrels per day oil refinery, which was earlier expected to come online by the middle of next year, he said. “Financial close has been delayed because banks have adopted a wait and see policy regarding Pakistan,” he said. “How can foreign investors be expected to come here when bombs have been going off and political parties are finding it hard to form government?”
The IRL being set up 48km from Karachi on the National Highway in Thatta district is based on the equipment of Petro Canada’s Oakville refinery, which was shut down a couple of years back and subsequently dismantled to be exported here.
The cost of the refinery, which has 79 per cent foreign shareholding, has scaled up to $900 million from $750m in 2007 and a plan to take up the production capacity to 133,000 bpd has already been put on the backburner.
It has been a subject of controversy as environmentalists say Petro Canada shut down the four-decade-old unit because of environmental concerns. But IRL says the property prices around the Oakville refinery site along a river in Canadian state of Ontario had skyrocketed.
According to a 2003 press release of Petro-Canada, the plant was closed down to consolidate operations at its Montreal refinery and due to introduction of a more stringent sulphur specification for gasoline.
Nevertheless, delay in the project will further the dependence of the country on imported petroleum products but a senior government official played down any impact saying the existing refineries import most of the crude oil.
“I don’t think that will make any big difference,” said Shaukat Durrani, a petroleum ministry spokesman, when asked if IRL’s delay would hit the country economically.At 4.9m tons annual capacity, IRL is capable of producing 1.2m tons of diesel, the main deficit fuel in Pakistan. Between July-January 2007-08, out of total diesel sales of 4.6m tons, 2m tons were processed by the five existing refineries.
According to industry officials, increase in domestic refining of crude oil helps in saving foreign exchange spent on import of petroleum products. “Light Arabian crude is selling at $100 a barrel and diesel at $125,” said Aftab Hussain, a manager at Pakistan Refinery Limited (PRL). “Twenty-five dollars could be saved on a barrel of this product locally produced.” Refineries in Pakistan operate under the protective pricing regime whereby they are allowed to collect 10 per cent duty on diesel as part of their revenues.
