December 04, 2008

UAE\'s oil investment is a big boost to Pakistani economy

It is reported that UAE, the top foreign investor in Pakistan, has come out with the biggest investment that will boost Pakistan's economy. The latest agreement between UAE and Pakistan is to establish an unprecedented USD 5 billion oil refinery at Khalifa Point in district Lasbela on Pakistan's Arabian Sea coast. It is the single biggest direct foreign investment in Pakistan's history.

The agreement to build the refinery was signed by Mr A Al Qubaisi MD of IPIC and Mr Farrukh Qayyum. Mr Mohammad bin Dha'en Al Hamili energy minister of UAE and the outgoing Prime Minister of Pakistan Mr Shaukat Aziz witnessed signing of the agreement to implement the project.

The agreement will establish the refinery with a capacity of 300,000 barrels a day of middle distillate products that are required in Pakistan, but will leave an exportable surplus of POL products. It will add 1.4 million tonnes of additional POL storage capacity. The refinery will more than double Pakistan's oil refining capacity. The refinery is planned to go on stream by December 2012. Islamabad has offered several tax breaks for the Khalia Point refinery. These include a 20 year tax free status. Pakistan has also provided 1,000 acres of lands to facilitate construction of the project. The location will be developed as a new city with all the necessary infra structure.

Mr Aziz said that "It is an historic day in the relations between the two countries. The refinery project will be a symbol of friendship and pride between the two nations. The project will further cement the relationship with UAE. It will be the largest refinery in the region, will meet domestic requirements and will be able to export its surplus output. Today, we culminated a long journey to come to this point."

Mr Hamili said that "UAE and Pakistan, both are witnessing economic growth. UAE has already been cooperating in many projects in Pakistan and the latest agreement to establish an oil refinery is another real expansion of those projects and cooperation with this country. Both sides are enjoying excellent relationship. UAE will make more investment in Pakistan which will be beneficial for people of both the countries."

Pakistan has an installed capacity to refine 12.8 million tones annually that means 250,000 barrels per day, contributed by its 5 existing refineries. It uses 15 million tones of POL products a year. With a 7% plus growth of GDP, the demand for POL products is rising rapidly. It is projected to rise from the current annual consumption of 58 million tonnes to 177 million tonnes of oil equivalent within the next 12 years.