Pakistan imports roughly $6 billion worth of chemicals and related raw material every year. This makes a sizeable chunk of the country’s overall exports. It can afford to completely substitute the chemical imports, and instead have the raw material made indigenously, if it has a small matter of a large naphtha cracker facility.
The idea is to have a state-of-the-art multipurpose grand infrastructure to use petrochemical raw substances into value-added chemical products. Recall that Pakistan exports Naptha to the tune of $1 billion every year. Naptha is the residual that the refiners produce once done with processing different grades of crude.
One does not have to look too far to see a booming cracking industry, as India has nine such units, whereas Pakistan has a grand total of zero. It is baffling to know that a feasibility study to have a cracking unit in Pakistan was done in the 90s, but like most things done in that era, it has since eaten dust and never saw the light of the day.
The Pakistan Chemical Manufactures Association (PCMA) seems to have taken the initiative to the next level and has been making considerable voice to get heard. The association has approached the likes of Ahsan Iqbal, who has reportedly liked the idea of having a naphtha cracker facility aimed at reducing trade deficit, saving valuable foreign exchange, and spurring industrial activity in the country.
The devil though, lies in the details. It is the massive investment requirement that is likely to be a major hindrance towards the goal. Setting up a grand multipurpose cracking facility, according to initial estimates by the PCMA would require around $6-8 billion. However noble the cause is, the fact of the mater remains that an investment of such magnitude remains unprecedented even in the CPEC era.
The government has asked the PCMA to prepare a feasibility study, which is likely to be made. Whether the government can put in seed capital is anyone’s guess. The association has hinted on acquiring land for the purpose in Gwadar, to make use of the refinery envisioned to be built in Gwadar. Will the private investors step in? Do they have the muscle? Will it have to be a CPEC project? All these are questions that need answers and very soon.
The estimated payback period in terms of foreign exchange savings and earnings is a very attractive 7 years. If long term planning is a thing in this country, naphtha cracking should sit on top of the priority list. More on it later!
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