TransAsia to Relocate 100,000-Barrel Refinery from Italy to Pakistan

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Researched by Industrial Info Resources (Sugar Land, Texas)--TransAsia Gas International LLC (Dubai, United Arab Emirates), a subsidiary of the Al Ghurair Group of Companies LLC, has firmed up plans to relocate a $600 million refinery project from Naples in Compania, Italy, to Port Qasim in Karachi, Pakistan. The 100,000-barrel-per-day (BBL/d) refinery is under construction and scheduled to be commissioned by April 2010. It will be Pakistan's eighth petroleum refinery. The project is expected to bring in more than $500 million in foreign direct investment to the country.

On April 21, TransAsia awarded an engineering and construction contract to Descon Engineering Limited (Lahore, Pakistan) covering utilities and product pipelines; design and construction of storage-handling facilities for crude and export products; and construction of off-sites. TransAsia has also sought formal approval from the government of Sindh and the Environmental Protection Agency for fast-track implementation of the project.

The Al Ghurair Group is in talks to acquire state-owned Pakistan State Oil Company Limited (KAR:PSO) (Karachi), which has a network of 3,400 petrol stations across the country and controls nearly 70% of the market. As part of its strategy to establish a strong foothold in South Asia, the group further plans to invest $1.4 billion to build two oil refineries, one in Pakistan and another in Sri Lanka.

TransAsia's project follows close on the heels of an earlier initiative taken by the Indus Refinery Limited (Karachi), a joint venture between investors from the U.S., the U.K., and the Middle East, as well as sponsors from Pakistan, to set up a 93,000-BBL/d refinery in Thatta near Karachi, with equipment procured from a unit owned and operated by Petro-Canada (NYSE:PCZ) (Calgary, Alberta) in Oakville, Ontario. The Oakville refinery was shut down in 2003 after environmental concerns were raised against the 40-year old facility. The equipment was subsequently dismantled and exported to Pakistan.

Canada-based SNC-Lavalin International Incorporated (TSX:SNC) (Montreal, Quebec) is the engineering, procurement and construction contractor for the project. Descon Engineering has bagged the contract to undertake civil work. The refinery is expected to be operational by December 2009.

However, Indus Refinery's project, which would have been Pakistan's sixth petroleum refinery, has been grappling with delays for more than a year. The cost of the project during this period has risen from $750 million to $900 million. The project has not yet reached financial closure with several banks being hesitant to finance projects in Pakistan that is currently caught in a political turmoil.

For related information, see May 13, 2005, news article - Petro-Canada Nears Sale of Idle Petroleum Refinery in Canada and Saudi Arabia Plans Oil Refinery in Pakistan.

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