The Pakistan State Oil Co, the nation’s biggest importer of petroleum products, plans to build a refinery with the cost of $6 billion to expand into processing crude.
The nation’s biggest company by revenue is looking for partners to help build a plant to process 2,00,000 to 2,50,000 barrels a day of oil, Chief Executive Officer Sheikh Imran-ul-Haque said in an interview in Karachi. He didn’t elaborate on how the company will finance the plant or give a timeline for the project as it was at its initial stage.
The Pakistan State Oil would like to “reverse the role” and refine crude rather than import fuel, Haque said. “We are nowhere. We need to diversify.”
The size of the refinery means that the Pakistan State Oil will produce about 12 million tons of fuel, similar to the amount the nation imported in the year ended July 31, and will mark a drastic change in the company’s business model. The plan will also help the country which is trying to meet revenue targets tied to an International Monetary Fund loan, save on foreign exchange.
“It’s a gigantic task to set up such a large refinery in Pakistan,” Fatiq Bin Khursheed, analyst at Optimus Capital Management Pvt said via phone. “Usually such big refineries are found in countries where there is local supply of crude but this will rely on imports and raising funds will not be easy.”
Pakistan spent about a third of its foreign reserves on fuel imports in the year that started from July 1, according to government data.
This is not the first time the Pakistan State Oil has proposed building a refinery. In 2012, the Pakistan State Oil said it planned to build a $750 million crude processor in Khyber-Pakhtunkhwa province by 2016.
The company’s shares have risen 16.5 per cent this year. They rose 1.2 per cent to 378.84 rupees on Thursday. The Pakistan State Oil reported a loss of 2.1 billion rupees ($20 million) in the three months ended March 31, its biggest in almost nine years.
Pakistan has five refineries including those run by Byco Industries Inc, which has a capacity to process 1,55,000 barrels a day of crude, and Pak-Arab Refinery Ltd with 1,00,000 barrels a day, according to the companies’ websites. China National Petroleum Corp’s subsidiary is also keen to set up one.
The Pakistan State Oil also plans to invest $100 million to double storage capacity of petrol and diesel reserves in a bid to avert the kind of fuel shortages witnessed last year. It also plans to import directly from Middle East state-owned refineries rather than open tenders, and seeks to find a partner before year-end to revive its lubricant business.
“My job is to lay the foundation” for these projects, Haque said. “I have a three-year contract and can only do so much,” said Haque, who joined the company in September, according to Bloomberg.