Parco to set up $5 bn deep conversion coastal refinery Hub, Balochistan

[Kompromat]

I thought Modi had detached UAE from Pakistan.

 

[Mo12]

I thought Modi had detached UAE from Pakistan.

Its a shame more Pakistan assets are being sold abroad where profits will be taken out of the country.

 

[Taxzu]

I thought Modi had detached UAE from Pakistan.

Well UAE has decided not to invest its money in this project. so yes not everything is well between Pak and UAE but this is more to do with Pakistan refusal to join in yemen war than Modi.

 

[niaz]

Pakistan has no refinery which can be called state of the art. These days optimum capacity of a refinery is 20-million tons or 400,000 bbl per day with the Coker which destroys all the heavy ends hence zero furnace oil. Such a refinery will cost about 5 to 6 billion dollars on its own and if associated with a petrochemical complex about $9-billion.

The most recently completed refinery that I am familiar with is the SATCORP located at Jubal. It is a joint venture of Total & Aramco, hence the name Saudi Aramco Total Corporation or SATCORP. It is a vast chemical complex with 20-million ton refining capacity which can run heavy crudes and came on stream a couple of years ago.

Modern refineries are capital intensive but because of the sophisticated instrumentation, employ highly skilled staff in limited numbers. Satcorp needed a capital outlay of $9.6-billion but only employs about 1.000 persons including drivers & janitors.

While I will love to see a modern sophisticated refinery in Pakistan, don’t expect that it will create lot of jobs for the locals. However I am afraid that like most previous refinery projects, this will also fizzle out due to lack of financiers. For example 100 K bbl per day Trans Asia Oil Refinery by Al Ghurair Group has been in pipeline for the last 5 years and understand it has now been abandoned.

I need to see the project completed before I shall believe that it will actually happen.

 

[Taxzu]

Pakistan has no refinery which can be called state of the art. These days optimum capacity of a refinery is 20-million tons or 400,000 bbl per day with the Coker which destroys all the heavy ends hence zero furnace oil. Such a refinery will cost about 5 to 6 billion dollars on its own and if associated with a petrochemical complex about $9-billion.

The most recently completed refinery that I am familiar with is the SATCORP located at Jubal. It is a joint venture of Total & Aramco, hence the name Saudi Aramco Total Corporation or SATCORP. It is a vast chemical complex with 20-million ton refining capacity which can run heavy crudes and came on stream a couple of years ago.

Modern refineries are capital intensive but because of the sophisticated instrumentation, employ highly skilled staff in limited numbers. Satcorp needed a capital outlay of $9.6-billion but only employs about 1.000 persons including drivers & janitors.

While I will love to see a modern sophisticated refinery in Pakistan, don’t expect that it will create lot of jobs for the locals. However I am afraid that like most previous refinery projects, this will also fizzle out due to lack of financiers. For example 100 K bbl per day Trans Asia Oil Refinery by Al Ghurair Group has been in pipeline for the last 5 years and understand it has now been abandoned.

I need to see the project completed before I shall believe that it will actually happen.

Brother I don't think you have seen Parco's Mid Country Refinery. Its one of the best industrial complexes in Pakistan. Yes it does produce other products but still it has best gross refinery margins in the world verified in every Solomon study. The refinery in question will only produce Mogas and HSD 50% each and will cost USD 5 billion.

 

[Sugarcane]

Brother I don't think you have seen Parco's Mid Country Refinery. Its one of the best industrial complexes in Pakistan. Yes it does produce other products but still it has best gross refinery margins in the world verified in every Solomon study. The refinery in question will only produce Mogas and HSD 50% each and will cost USD 5 billion.

https://defence.pk/threads/members-interview-niaz.473879/

 

[Khafee]

Pakistan has no refinery which can be called state of the art. These days optimum capacity of a refinery is 20-million tons or 400,000 bbl per day with the Coker which destroys all the heavy ends hence zero furnace oil. Such a refinery will cost about 5 to 6 billion dollars on its own and if associated with a petrochemical complex about $9-billion.

The most recently completed refinery that I am familiar with is the SATCORP located at Jubal. It is a joint venture of Total & Aramco, hence the name Saudi Aramco Total Corporation or SATCORP. It is a vast chemical complex with 20-million ton refining capacity which can run heavy crudes and came on stream a couple of years ago.

Modern refineries are capital intensive but because of the sophisticated instrumentation, employ highly skilled staff in limited numbers. Satcorp needed a capital outlay of $9.6-billion but only employs about 1.000 persons including drivers & janitors.

While I will love to see a modern sophisticated refinery in Pakistan, don’t expect that it will create lot of jobs for the locals. However I am afraid that like most previous refinery projects, this will also fizzle out due to lack of financiers. For example 100 K bbl per day Trans Asia Oil Refinery by Al Ghurair Group has been in pipeline for the last 5 years and understand it has now been abandoned.

I need to see the project completed before I shall believe that it will actually happen.

Sir, I hate to bother you like this, but could you clarify a few things for me, since I 'm more or less clueless about refineries.

You said, that the investment required for refineries is not there.

1) Do the returns NOT justify the investments?
2) What are Pak govt hurdles that are preventing this?
3) Is the skilled manpower available in Pakistan?
4) Can you briefly list what would be required for such a project from both investor and Govt, to make a project like this viable? and what would be the ideal production capacity?

I look forward to your answer.

Best Regards

 

[niaz]

Brother I don't think you have seen Parco's Mid Country Refinery. Its one of the best industrial complexes in Pakistan. Yes it does produce other products but still it has best gross refinery margins in the world verified in every Solomon study. The refinery in question will only produce Mogas and HSD 50% each and will cost USD 5 billion.

I am conversant with the Pak Arab refinery with 100 K bbl per day capacity. It is no doubt far more advanced than the older PRL, NRL & Attock oil installations which are basically hydroskimming units with no cracking /upgrading facility. But at the international level PARCO’s level of sophistication is quite low.

Parco went on stream in the year 2000. KNPC 200 K bbl Shuaiba Refinery was commission in 1968 and expanded in 1975. Having worked in KNPC for 3 years, I am familiar with each unit of that refinery. Shuaiba was far more sophisticated even though completed 25 years earlier. Shuaiba Refinery has 2 H-oil units , an Iso- cracker and an Isomax unit not found in the PARCO refinery. It will be shut down later this year when the new KPC refinery comes on stream.

At the international level, refineries such as SATCORP & SASREF at Jubail and SAMREF & YASREF at Yanbu and Reliance of India export their products to Europe & the Far East competing with each other and other Singapore & Rotterdam based refineries. Despite these refineries being true state of the art, price fluctuation results in negative refining margins on occasion.

Refinery margins are set by cost of production as well as the selling price. PARCO has a captive inland market and 100% of its produce must be consumed before anything can be imported. Had PARCO been a coastal refinery and had to export products competing at the international level, please believe me the situation would have been quite different.

Since everything is subjective and relative, I have no problem if you choose the continue believing the Parco is one of the top refineries of world.

Sir, I hate to bother you like this, but could you clarify a few things for me, since I 'm more or less clueless about refineries.

You said, that the investment required for refineries is not there.

1) Do the returns NOT justify the investments?
2) What are Pak govt hurdles that are preventing this?
3) Is the skilled manpower available in Pakistan?
4) Can you briefly list what would be required for such a project from both investor and Govt, to make a project like this viable? and what would be the ideal production capacity?

I look forward to your answer.

Best Regards

Sir,

To properly answer your question, I need to carry out a feasibility study. However, having some knowledge of the refinery economics and arranging of the financing arrangements I can make the following comments.

It is not easy to find financing for $5-billion. One has to convince a consortium of banks and investors that their investment will not be lost. In this case one needs to forecast crude prices and refinery margins for the next 20 years and show about 8 or 9 % yearly ROI before the project becomes a reality.

Most of the new refineries are now located at the crude producing centres to ensure continuity of supply. Additionally majority of the partners are major oil companies that have a retail system which can guarantee that base load produce will be sold. Pakistan is not a crude producing country. Another problem being Pakistan is not a very safe country to work. We have seen Chinese workers kidnapped, this is a major stumbling block for the FDI.

However, if GOP can guarantee that the base load, say about 65% of the products, will be consumed in Pakistan at the import parity prices with about 8% return; probably some financiers could be found. I have seen that Bosicor is virtually shut down. Al Ghurair project is not liklely to be completed either. These were $100-million projects; this is $5-billion! That is why I say that I will need to see it working to believe.

 

[TheDarkKnight]

Most of the new refineries are now located at the crude producing centres to ensure continuity of supply. Additionally majority of the partners are major oil companies that have a retail system which can guarantee the base load produce will be sold. Pakistan is not a crude producing country. Another problem being Pakistan is not a very safe country to work. We have seen Chinese workers kidnapped, this is a major stumbling block for the FDI.

Thanks so much for an informative post. About this hasnt the situation improved in the last couple of years due to zarb-e-azb? Or progress has only been made in eliminating hardcore terrorists/insurgents like ttp, mqm, ppp etc.?

 

[Taxzu]

I am conversant with the Pak Arab refinery with 100 K bbl per day capacity. It is no doubt far more advanced than the older PRL, NRL & Attock oil installation which are basically hydroskimming units with no cracking /upgrading facility. But at the international level PARCO’s level of sophistication of is quite low.

Parco went on stream in the year 2000. KNPC 200 K bbl Shuaiba Refinery was commission in 1968 and expanded in 1975. Having worked in KNPC for 3 years, I am familiar with each unit of that refinery. Shuaiba was far more sophisticated even though completed 25 years earlier. Shuaiba Refinery has 2 H-oil units , an Iso- cracker and an Isomax unit not found in the PARCO refinery. It will be shut down in later this year when the new KPC refinery comes on stream.

At the international level, refineries such as SATCORP & SASREF at Jubail and SAMREF & YASREF at Yanbu and Reliance of India export their products to Europe & the Far East competing with each other and other Singapore & Rotterdam based refineries. Despite these refineries being true state of the art, price fluctuation results in negative refining margins on occasion.

Refinery margins are set by cost of production as well as the selling price. PARCO has a captive inland market and 100% of its produce must be consumed before anything can be imported. Had PARCO been a coastal refinery and had to export products competing at the international level, please believe me the situation would have quite different.

Since everything is subjective and relative, I have no problem if you choose the continue believing the Parco is one of the top refineries of world.




Sir,

To properly answer your question, I need to carry out a feasibility study. However, having some knowledge of the refinery economics and arranging of the financing arrangements I can make the following comments.

It is not easy to find financing for $5-billion. One has to convince a consortium of banks and investors that their investment will not be lost. In this case one needs to forecast crude prices and refinery margins for the next 20 years and show about 8 or 9 % yearly ROI before the project becomes a reality.

Most of the new refineries are now located at the crude producing centres to ensure continuity of supply. Additionally majority of the partners are major oil companies that have a retail system which can guarantee the base load produce will be sold. Pakistan is not a crude producing country. Another problem being Pakistan is not a very safe country to work. We have seen Chinese workers kidnapped, this is a major stumbling block for the FDI.

However, if GOP can guarantee that the base load, say about 65% of the products, will be consumed in Pakistan at the import parity prices with about 8% return; probably some financiers could be found. I have seen that Bosicor is virtually shut down. Al Ghurair project is not liklely to be completed either. These were $100-million projects; this is $5-billion! That is why I say that I will need to see it working to believe.

Sir, first of all i didnt mean any disrespect and was just giving my opinion but obviously your expertise, experience and knowledge is far better than mine. I just said its best industrial complex in pakistan not world.
You are right on almost all of the factors. personally from financial point of view I also believe that its difficult project to execute but Parco does have financial muscle and local demand is good enough that projections will satisfy banks. But obviously USD 5 billion is not a small amount and many factors have to go in Parco's favour. But I am sure of one thing that Prime Minister will do a ground breaking of this project whether or not project will materialise is other story.
The original idea of khalifa coastal refinery was to export all the out pu and In 2012 UAE was also interested to finance the project but since these days we are not quite brotherly so they arent going to provide any financial support. Also due to our red tapes and greed of our politician this project couldnt materialise. The planned refinery will have all those things that you mentioned and as per my knowledge parco does have iso craker (I might be wrong) and the planned expansion also includes Isomax unit.

 

[niaz]

Since all of my work experience has been in the Petroleum sector, I have been keenly following its progress.
I came across the following in the Parco website.

“Subsequently the project was visited by Shahid Khaqan Abbasi in September 2017.

While briefing the press about the project, Minister stated that this project will have a refining capacity of 250,000 BPD and will also involve construction of storages, pipelines, marine terminal and development of allied infrastructure. The project is expected to be completed by 2022. The project will bridge the gap in the demand and supply of refined products, which at present is approximately 13 million metric tons per annum and is likely to increase further due to economic growth. “

The details in the following link.

https://www.parco.com.pk/?news_even...illion-dollar-parco-coastal-refinery-pcr-site


Understand that the project is finally going ahead because of a very a very generous incentive package in July this year.

"Incentives worth $1.6b approved for new coastal refinery in Balochistan"

By Zafar Bhutta, Published: July 28, 2018

https://tribune.com.pk/story/176787...6b-approved-new-coastal-refinery-balochistan/

However, the refinery capacity is actually 250K bbl per day instead of the 300K bbl per day mentioned in the opening post.

“Pakistan in collaboration with UAE is going to establish a state-of-the-art refinery with an estimated investment of around $5 billion at Hub, Baluchistan, said Director General Oil (Ministry of Petroleum and Natural Resources), Abdul Jabbar Memon, on Friday.

''Pak Arab Coastal Refinery'' would have an installed capacity to refine 250,000 barrels per day crude Oil. "The country’s biggest refinery is being set up by Parco with the assistance of UAE," the DG Oil told media after a meeting of Pakistan''s oil industry representatives at Byco Petroleum Pakistan Limited refinery at Hub, Baluchistan.

The DG said that refineries established in the coastal belt of Baluchistan would enjoy a 20-year tax exemption on condition that they manage to refine over 100,000 barrels per day crude oil. The government has offered this special incentive primarily to encourage investment in the local refinery sector.”

https://fp.brecorder.com/2018/03/20180310350431/

 

[Samlee]

Since all of my work experience has been in the Petroleum sector, I have been keenly following its progress.
I came across the following in the Parco website.

“Subsequently the project was visited by Shahid Khaqan Abbasi in September 2017.

While briefing the press about the project, Minister stated that this project will have a refining capacity of 250,000 BPD and will also involve construction of storages, pipelines, marine terminal and development of allied infrastructure. The project is expected to be completed by 2022. The project will bridge the gap in the demand and supply of refined products, which at present is approximately 13 million metric tons per annum and is likely to increase further due to economic growth. “

The details in the following link.

https://www.parco.com.pk/?news_even...illion-dollar-parco-coastal-refinery-pcr-site


Understand that the project is finally going ahead because of a very a very generous incentive package in July this year.

"Incentives worth $1.6b approved for new coastal refinery in Balochistan"

By Zafar Bhutta, Published: July 28, 2018

https://tribune.com.pk/story/176787...6b-approved-new-coastal-refinery-balochistan/

However, the refinery capacity is actually 250K bbl per day instead of the 300K bbl per day mentioned in the opening post.

“Pakistan in collaboration with UAE is going to establish a state-of-the-art refinery with an estimated investment of around $5 billion at Hub, Baluchistan, said Director General Oil (Ministry of Petroleum and Natural Resources), Abdul Jabbar Memon, on Friday.

''Pak Arab Coastal Refinery'' would have an installed capacity to refine 250,000 barrels per day crude Oil. "The country’s biggest refinery is being set up by Parco with the assistance of UAE," the DG Oil told media after a meeting of Pakistan''s oil industry representatives at Byco Petroleum Pakistan Limited refinery at Hub, Baluchistan.

The DG said that refineries established in the coastal belt of Baluchistan would enjoy a 20-year tax exemption on condition that they manage to refine over 100,000 barrels per day crude oil. The government has offered this special incentive primarily to encourage investment in the local refinery sector.”

https://fp.brecorder.com/2018/03/20180310350431/

Sir What Is Dangerous About The Package????Incentives Are Always Given By Governments All Over The World To Promote Industrialization

 

[niaz]

The original idea of khalifa coastal refinery was to export all the out pu and In 2012 UAE was also interested to finance the project but since these days we are not quite brotherly so they arent going to provide any financial support. Also due to our red tapes and greed of our politician this project couldnt materialise. The planned refinery will have all those things that you mentioned and as per my knowledge parco does have iso cracker (I might be wrong) and the planned expansion also includes Isomax unit.

Deep conversion implies having a 'Coker' whereby all the bottom of the barrel is converted into high-value gasoline & gas oil (Diesel) with 'Zero' fuel oil (Furnace oil). Instead, Petroleum Coke is produced which can be mixed with coal and used as fuel for power generation and in cement plants.

We should not ignore the fact that there are frequent periods where refinery margins are negative at international prices. Therefore IMHO with so many new 400K bpd refineries in the Arab Gulf and 1.2 million bpd Reliance refinery & another 400 K bpd Essar refinery (all with full conversion) on Indian west coast, fully export based Khalifa point refinery would not be economically viable.

 

[ziaulislam]

@Kabira

 

[niaz]

Sir What Is Dangerous About The Package????Incentives Are Always Given By Governments All Over The World To Promote Industrialization

Agreed that incentives are quite common to induce inward investment. Since Pakistan is perpetually short of funds, suppose one needs to go 'over the top' to attract investment. However, you would agree that 20 year ‘Tax Break’ is on the very high side.

One must remember that indigenous produce is not always the cheaper option. As the cost of crude at international prices plus freight plus the cost of refining could mean higher than “import parity” product price because quite often refinery margins are ‘negative’ due to depressed international product prices.

Nevertheless, I welcome setting up a deep conversion refinery as it would provide job opportunities and experience of the state of the art technology to the Pakistani engineers.


I am conversant with the economics of the SATORP (Saudi – Total refinery) at Jubal and SAMREF (Saudi Aramco refinery) at Yanbu. Saudi share is 62.5% in SATORP & 50% in SAMREF. Both of these refineries were justified on the basis of pure economics and there was no incentive given by Aramco other than a guarantee of crude supply and that Armco will uplift their share of the products at cost, with the refinery managed by the foreign companies.