Pak Arab Refinery Limited (Parco) has announced plans to invest up to $1.3 billion in setting up a hydrocracker unit to convert furnace oil into petrol and diesel.
According to a report, this project aims to ensure a sustainable oil supply and energy security in the country.
The Special Investment Facilitation Council (SIFC) recently discussed the matter, with the Petroleum Division requesting an extension for implementing the new refinery policy beyond the original deadline of April 22, 2024, for signing refinery upgrade agreements with the Oil and Gas Regulatory Authority (Ogra).
While three refineries – Attock Refinery Limited (ARL), National Refinery Limited (NRL), and Pakistan Refinery Limited (PRL) – are ready to sign deals, Parco and Cnergyico PK need more time.
The shift in the power sector from furnace oil to liquefied natural gas (LNG) has posed challenges for refineries in managing furnace oil stocks.
In response, Parco has begun exporting furnace oil and now plans to invest over $1 billion in a new hydrocracker unit to convert it into petrol and diesel, thereby reducing import dependency and saving foreign exchange.
The estimated cost of the hydrocracker unit is $1.75 billion, with clean fuel production around $500 million. Parco is evaluating a “mid-case” investment of $1 billion to $1.3 billion.
The company anticipates $1.5 billion in export proceeds over the next six years and has requested the State Bank of Pakistan to allow the use of these proceeds for the project’s foreign currency needs.
The new refinery policy, which offers government incentives, is intended to facilitate plant upgrades for producing clean Euro-5 fuels. Parco requires $500 million for upgrading its plant. However, its shareholders prefer a long-term investment strategy beyond just Euro-5 production.
Parco has $400 million available for equity investment and is expected to benefit from incentives under the brownfield refinery policy, estimated at around $300 million.
