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China invited to set up mid-country oil refinery


8/9/2017

ISLAMABAD: Pakistan has offered China to invest in setting up a mid-country deep-conversion refinery near Lahore and laying a gas pipeline from Karachi to Lahore for the transmission of imported liquefied natural gas (LNG) to consumers in Punjab, an official says.

The offer was made during the visit of a Chinese delegation, headed by Nur Bekri, Administrator of National Energy Administration in July this year.
 
During a meeting, the Pakistani side requested China to set up an oil and gas sub-group under the Energy Working Group for facilitating production and supply projects.
Arif Habib to set up power plant with Chinese funding
 
Consequently, they agreed to establish the sub-group and assess investment opportunities in the oil and gas projects.
 
The Chinese government is working with Pakistan under the China-Pakistan Economic Corridor (CPEC) programme, but there are no oil and gas production and supply projects.
 
According to the official, representatives of the Ministry of Petroleum and Natural Resources told the Chinese side during the interaction that the ministry was ready to work with Chinese companies in a government-to-government arrangement outside of the CPEC framework in a bid to develop oil and gas infrastructure projects on a commercial basis.
 
Oil and gas is a commercially viable sector in Pakistan without any subsidy support from the government.
 
Pakistan offered China to pour money into setting up a mid-country deep-conversion refinery with production capacity of 250,000 barrels per day (bpd).
 
Separately, the government has started work on a 250,000 bpd deep-conversion refinery, which will be developed in a joint venture arrangement with Abu Dhabi in Karachi. Pakistan needs another refinery of 250,000 bpd in the mid-country near Lahore.
 
At present, five hydro-skimming refineries are working in the country and they annually produce only 13 million tons of petroleum products. The remaining demand is met through imports after tenders are floated by Pakistan State Oil and private sector oil marketing companies.
 
Pakistan ramps up coal power with Chinese-backed plants
 
The demand for petrol is growing at a pace of 20% per annum and diesel at 10% per annum. There are growing calls that Pakistan needs to be self-sufficient in the production of refined oil products.
 
The government has also invited investors to pour capital into building white oil pipelines from Multan to Peshawar as well as developing petroleum storage facilities at various locations in the country.
 
In Pakistan, natural gas constitutes 50% of primary energy supply whereas oil has 32% share.
 
Karachi-Lahore pipeline
 
The Karachi-Lahore gas pipeline, which Pakistan has offered China to build, will carry 1.2 billion cubic feet of imported gas per day (bcfd).
 
Pakistan has started importing LNG since March 2015 to meet the growing shortfall and do away with electricity outages. At present, the country is producing 4 bcfd of natural gas whereas consumer demand stands at 8 bcfd.
 
Apart from LNG import, the government is also working on two transnational gas pipelines that will originate in Iran and Turkmenistan.
 
Following the import of LNG, all gas-based power plants are working, fertiliser manufacturers are exporting 700,000 tons this year instead of importing one million tons, over 1,500 compressed natural gas (CNG) stations have resumed operations, industry is receiving gas 24 hours a day and load-shedding for domestic consumers in winter has been largely eliminated.
 
The government is also developing three LNG-based power plants in Punjab with a cumulative capacity of 3,600 megawatts. A whole supply chain ranging from long-term LNG contracts to gas supply agreements with the power plants has been put in place.
 
Pakistan is currently importing 4.5 million tons of LNG per annum and the volume will double to 9 million tons before the end of this year. The government has projected LNG requirement at 20 million tons per year within three years and 30 million tons within five years.