Khalifa Refinery project: IPIC, Parco may ink deal to form 'KCRC' in March

Abu Dhabi oil giant International Petroleum Investment Company (IPIC) and Pak Arab Refinery Limited (Parco) are expected to sign 'participation agreement for formation of company' to execute multi-billion dollars Khalifa Coastal Oil Refinery project in March 2011.
While briefing National Assembly Standing Committee on Petroleum and Natural Resources, Parco Managing Director Rasheed Jang said the paper for formation of company had been submitted to Board of Directors of Parco in a recent meeting and lawyers of IPIC were examining them. "We are hopeful that participation agreement for formation of company will be signed in March," he added. MD Parco said that circular debt issue was a major hurdle in refinery project and claimed that it was to receive Rs 28 billion from PSO.
Sources said Khalifa Coastal Refinery Company (KCRC) would be formed to carry out multibillion dollar project. The proposed refinery would have the capacity to process 13 million tons oil per annum. The government has allotted 1000 acres land for KCR project.
The IPIC had suspended work on KCR in January 2009 due to global recession and a row over management issue with Islamabad. Total cost of KCR has been estimated at around $6 billion. Parco was to hold 24 percent shares and IPIC the other 76 percent in the refinery to be built in the coastal area of Hub, Balochistan. Parco is a joint venture of the government of Pakistan and IPIC.
Abu Dhabi oil giant IPIC representative had expressed reluctance to resume work on multi-billion dollars KCR project due to circular debt in the 126th meeting of the Board of Directors, chaired by Naveed Qamar, Minister for Petroleum and Natural Resources on October 7, 2010.
Parco's Board of Directors (BoD) in the 121st meeting held on October 5, 2009 had granted approval for initial funding of $500 million for KCR. It had also approved immediate release of $13 million to kick off subcontracting work related to the implementation of the KCR project. "After approval of funds by Parco, IPIC management decided to go ahead with the project in December 2009, but the circular debt issue became the major reason for delay in the project," sources said. An accord on implementation of the Khalifa Coastal Refinery Project was signed at the Prime Minister House in Islamabad on November 13, 2007.