China to replace Europeans as lead investors in Indus Refinery

KARACHI: China will replace the Europeans as lead investors in Indus Refinery Limited (IRL), one of Pakistan’s largest refineries, which will be built near Karachi, a top company official said on Tuesday.
Pakistani sponsors of the project signed a contract with the Chinese government a few weeks back, fetching commitment of approximately $535 million, said Sohail Shamsi, Chairman IRL.
“Chinese have been really helpful,” he said. “I thought no one will come and invest in the country. We tried to convince several Middle East investors, even the monarchs. But no one was interested.”
Work on 93,000 barrels per day Indus Refinery started in 2004, but was stopped two years back after the foreign investors abandoned the project because of political turmoil.
Shamsi said that the riots, which followed the assassination of former prime minister Benazir Bhutto in December 2007, badly affected the refinery.
“The Europeans were here in Karachi then and stuck inside their rooms for three days. They packed up their bags, never to look back again.”
The company had got the Chinese onboard without Pakistan government’s help, he said. “We had stationed a representative in China for five months to coordinate with the authorities there. And we have succeeded in it.”
He said that the study for the civil works might start as soon as next month. “I am heading to China again next week to finalise the name of the contractors. We hope the government selects China National Chemical Engineering Group Corporation (CNCEC).”
China’s interest in overseas refining projects has increased as it works to secure energy supplies to meet its growing demand. There are fears that the lack of global refining capacity can make petroleum products scarce. Shamsi said that the refinery will cater to the domestic needs only.
“They are not investing in Indus Refinery to export products from here into China, but petrol can be exported. It remained a surplus product in the country,” he said.
The five refineries in Pakistan altogether produced 8.113 million tons in July-June 2009/10, eight percent decline over the previous year.
Against this local production, the demand stands for 20.3 million tons of petroleum products, according to the Oil Companies Advisory Committee.
Indus Refinery Limited was expected to be operational by mid-2009. A political turmoil, which downgraded the credit rating of the country after Bhutto’s assassination left Shamsi running after international banks to finance the project.
Being set up 48km from Karachi on the National Highway in Thatta District, IRL is supposed to be the first crude oil refinery since Bosicor Refinery began production in 2004.
IRL has the plant and equipment of what used to be Petro Canada’s Oakville refinery, which was shut down a couple of years back and subsequently sold. More than half of the plant and machinery has been imported.
The cost of the refinery, which has 79 percent foreign shareholding, has already scaled up far beyond the $750 million set in 2007.