40,000 barrels/day: Sharjah-based investors to set up $250m oil refinery in KP

[niaz]

I doubt this will be a financially viable because of low volumes. Refinery nowadays need to be larger.

@niaz , your expertise on this would be appreciated.

No name has been mentioned so difficult to identify. There was a Sharjah based company called FAL Oil which was quite active in Furnace Oil supplies to Pakistan a few years back. The company went bankrupt and no longer exists. The owners have resurfaced under the name of Horizon oil. This company is also under the cloud for Iran sanction busting. As a professionally curtsey, I am not given to bad mouthing other oil companies; let it suffice that I wouldn’t do business with them.

IMO 20K and/or 40K bbl per day refinery is too small to be economic. I am used to working with 400 K bbl per day and $5-billion refineries. There are many skid mounted refineries in existence, but these are not proper refineries; these are splitters comprising of a small pipe-stil (distillation column) with no additional facilities.

About 20 years ago FAL picked up Abu Dhabi’s Umme Nar refinery’s equipment after it was closed down and brought it to Sharjah. One could see the rusting tanks & towers on the way to FAL’s office in Sharjah. If the group is the same, it could be that the owners are thinking of revamping this junk to re-install it in KPK. Looking at it from strictly technical pointy of view, I don’t see any benefit in it for Pakistan or for the KPK. If I would rather expand Attock Refinery at Morgah.

However it is only a Memorandum of Understanding. Let us wait and see how the things progress.

 

[Cheetah786]

What's a security and a commodity? If you read my post in detail, I mentioned the SEC and other agencies. BTW, the SEC has total authority over any business merger, acquisition or other business dealings. Googling and posting answers doesn't really help. By the way, you may be dealing with an expert in O&G/ Alternative Energy sector.

OK one more time, business mergers or acquisitions have nothing to do with oil purchases.when you sign a contract to buy fuel for next five to ten years for a fixed price no bureaucrat is involved in this period.No i repeat no US Canadian or European government agency monitors business oil purchases.

SEC is the corporate regulator i.e. the watchdog of All the public and private limited companies in US akin SECP in Pakistan. If an investment bank trades in oil future or a oil marketing or exploration company purchase or sell oil future as business practice. SECP has the authority to do the needful. For example eventhough Fed or FDIC are specialized regulators in US akin FSA in UK and SBP in Pakistan. But they do not overrule the authority of SEC to intervene when necessary.

OK for the last time, we are not talking about mergers and acquisitions, we are talking about oil contracts between two companies.

 

[waleed3601]

@Bomber Here's another article posted on the Directorate of Information Govt of KPK's page from yesterday:

CM meets CEO of Spec Company
Offers establishment of Oil Refinery between Kohat & Karak
Handout No.3 Peshawar 16th January 2015
A delegation of the experts of renowned company SPEC in Oil & Gas and other energy sectors called on KP Chief Minister Pervez Khattak under the leadership of its Chief Executive Zafar Sheikh here in CM House and offered the establishment of Oil Refinery at any location in mid of Kohat and Karak. The Chief Executive SPEC told that he is visiting Khyber Pakhtunkhwa on invitation of Mohsin Aziz Industrialist and Vice Chairman of Khyber Pakhtunkhwa Board of Investment and Trade (KP BoIT), along with expert team and keen to initially invest US$ 250 million in the establishment of oil refinery here. Initially, he said the refinery will produce LPG, petrol, Kerosene, jet fuel, diesel, furnace oil, pitchwoman asphalt and other products from 20,000 per day crude oil Besides, Provincial Minister for Energy & Power Mohammad Atif Khan Vice chairman BoIT KP,Mohsin Aziz, Secretary Industries Sahibzada Saeed, Secretary Communication & Works Ahmad Hanif Orakzai, Principal Secretary to CM, Shehzad Bangash, Chief Executive KP OGDCL Raziuddin and other concerned authorities were also present on the occasion.
In next two phases, he told the consumption would be enhanced to 30000 to 40000 barrel per day. The quality of diesel and petrol manufactured by the company would be of best quality market and its demand would be high not only in Pakistan but also in the neighboring countries, which will result in the earning of precious foreign exchange for the country. Similarly, he also offered in first year the company will establish thermal power station of 50 megawatt and in next phase of 100 megawatt and 150 megawatt respectively. The electricity generated from these thermal power station will be sold to national grid on the conditions of the Khyber Pakhtunkhwa first. Highly appreciating the introduction of corruption free, transparent and economy friendly policies by the coalition government of PTI, he said that these policies are discussed in abroad and hoped that due to sincerity this government would very soon achieve the targets of the progress and prosperity of the people.
The chief minister while welcoming the offer said that the provincial government besides provision of land would also extend full cooperation to the company in the granting of no objection certificate (NoC) from the federal government. He said that collectively the country produce 92000 barrel crude oil per day while 50000 barrel oil is produced only in Khyber Pakhtunkhwa, which for refining is sent to the oil refineries in Attock and Karachi and they have to repurchase it on hundreds fold high price. The production of petroleum products at local level will not only benefit our own province, rather the whole country and for first time the industrial development would be revived. On the request of the company, the chief minister directed the provision of information regarding the capacity of production of oil and gas and other related matters to the company with immediate effect and made it clear that the company would get all possible cooperation in this regard for which besides, BoIT, a team of the Energy Department would also be appointed.
In next phase, the Chief Minister also offered to the company investment in generating of electricity from municipal solid waste, mega townships near Peshawar and Swabi Motorway, Swat Expressway and construction of other new highways. He said entrepreneurs are usually scared of corruption and unrest when investing anywhere while these both are the top most focus priorities of PTI-led coalition govt wherein tangible results are being accrued of it. After announcing Provincial Mineral Policy, industrial policy for the province is also being evolved, he revealed. For this purpose, he said a committee comprising industrialists, bureaucrats, consultants and experts has also been setup. He made it clear that the PTI-led coalition government along with effective legislation in all sectors is framing comprehensive policies to enable the province to march forward in organized manner like developed countries and leave no deficiency or lacunas in this regard.
Pervez Khattak said that industrialization is crucial for us, which besides the alleviation of backwardness, poverty and abolition of unemployment could also guarantee economic prosperity in the province. He said that though due to ill conceived policies in the past, Khyber Pakhutnkhwa is rendered unfeasible for industries; however, his govt will not allow it to happen and in this regard it had decided to take some fundamental steps. Furthermore, he said PTI-led coalition govt is considering for taking of trading and industrialist community into confidence. He said that KP govt is abolishing red tapism in public sector organizations and in future all government departments will provide one-window operation to take measures with immediate effect to facilitate he industrialist and investors. He said that now it is also the responsibility of industrialists to come forward and extend cooperation to us.
The Chief Minister said that the government is taking sincere measures for guaranteeing the abolition of corruption, change of system, supremacy of merit, justice and law in the province to put all sectors including business on the right. He said that the people have big expectations from the PTI led coalition government, which he said would be accomplished at any cost. The measures, he said, besides the provision of cheap electricity to woo domestic investors and handing over of all industrial zones to private sector also included several other policy related steps. He said that the government has decided the establishment of new industrial zones at important trading areas and an industrial estate is also being established on the gateway to Kohat and Karak, which would be followed by Malakand. He said that the Oil Refinery besides the promotion of small and medium enterprises will also generate employment opportunities for unemployed youth. Similarly he said his govt along with offering attractive incentives for industrialists and investors is also extending them all required facilities and guarantees to develop industries, stand our deteriorated economy on solid feet and generate maximum opportunities for trade businesses of our youth.
Declaring technical education very crucial for industrial development, the chief minister said that the government is taking solid steps for reforming technical and vocational education in public sector institutes on scientific lines to meet the requirements of the indigenous industries and needs of the present era. For this purpose, he said, besides granting autonomous status to Technical Education and Vocational Training Authority (TEVTA), 500 students have recently been sent to Karachi for higher technical education with cost of Rs.100 million. Similarly, Small Industries Development Board (SIDB) and Sarhad Development Authority (SDA) were also being merged and under legislation it will be formally given autonomy. He said peace is essential for our industries to which his govt had given attention since very beginning and organized police force for this purpose while very soon peace of the province will be mentioned as example in the whole country
--------------------

@niaz sir you seem to be knowledgeable in these things. Can you shed some light on the highlighted part?
I mean you said that such small quantity is not economically viable then why are they establishing it in the first place?
Also, how are the credentials of this company as mention in the article called "Spec"? Apparently it's Hungarian.

 

[Skywalker]

you gotta have dollars in cash for such deals bro.

Not just any cash. But DOLLARs in Cash!

Pakistanis love walk around with empty wallet, hence the beggary.

Correct your assumptions..it's the politicians not the common layman....I hope you understand that mr. Historian.

 

[FaujHistorian]

Correct your assumptions..it's the politicians not the common layman....I hope you understand that mr. Historian.

itna ghussa?

 

[Green Arrow]

It is a good news in terms of FDI and for our economy too

 

[niaz]

Let us analyse the project in a logical manner.

SPEC:

I found the following from SPEC website:

“SPEC is a vertically integrated engineering and fabrication company providing turnkey process solutions to the Oil and Gas Sector. With strategically situated global engineering and fabrication facilities, SPEC offers complete solutions to our client. SPEC’s key advantages are in the services supplied, areas of operation and competitive pricing.

SPEC offers a full range of Oil and Gas Conditioning Products including:

• Glycol Dehydration
• Amine Sweetening
• LPG Recovery
• Molecular Sieve Dehydration
• Hydro Carbon Dew Point Control
• Condensate Stabilization
• Early Production Facilities
• Gas Compression
• Utilities and Ancillaries
• Turnkey Process Plants “

You can see it is a very small company and only dealing with minor processes. No mention of main refinery units such as design and of fabrication of Atmospheric Column, catalytic reformer, hydro desulphurization of distillates, sulphur recovery, , catalytic cracker, visbreaker,, cokers and furnaces. Or large tanks farms and terminalling facilities. No wonder I hadn’t heard of the company before.

One must always remember, in an effort to show in a good light, all companies exaggerate in their website site. For example if you were a su-bcontractor or consultant for LPG Recovery, you make out as if you were the prime contractor. Regret my inability to put much faith in this company.

I have a feeling that CEO of SPEC is the same Mr Riazuddin who was CEO of ARL until 2005. A clever man but more of an expert at exaggerating what he could do than actually at doing it I am sure that there is some truth in what SPEC claim they have done, but they have never built a refinery before.


The project:

From the post above.

Currently there are two land-locked refineries in Pakistan. Attock Oil Refinery (ARL) at Morgah & Pak Arab Refinery (PARCO) at Kot Mahmud near Multan.

To avoid non- geographical oil movement, all the crude produced north of river Jhelum is processed at 45,000 bbl. per day ARL, Morgah. The products are then preferentially supplied to northern locations. Crude for the 100, 000 bbl. per day Parco refinery is pumped via 870 Km pipeline from Karachi to Mahmud Kot. There is a 362 Km white oil (refined products) pipeline from Mahmud Kot to Machike. The white oil pipeline alone cost $480-million in 1997.

The article states that current production of KPK is 50,000 bbl. per day. I am surprised why isn’t the excess oil processed at Parco? Why has it got to go all the way to Karachi?

IMO, it would be more economic sense to expand ARL to handle the additional crude found in KPK and transport products to KPK. However if the PTI gov’t wants a feather in the cap for setting up a refinery in KPK; they should go to an internationally recognized company.

I have the feeling that these people will buy written off junk from various locations and set up a hotch potch refinery, while with over invoicing most of the funds would be creamed off outside Pakistan. Just examine his past, Pervez Khattak does not have best of the reputations.

However, if the KPK crude production is indeed 50,000 bbl. per day, a tea-pot refinery project is feasible.