According to PM's advisor on petroleum, Dr Asim Hussain, the government is committed to shifting the entire [decades old and by now enormous] oil storage facilities at the Keamari terminal to Khalifa Point in Hub, and would be fed by a single-buoy mooring to counter 'security' concerns.
Ironically, imbedded in the plan are the vulnerabilities of placing all the eggs in one basket, location-wise as well as technology-wise. I served in the oil industry during the 1970s and saw how Indian Navy bombed Pakistan's naval installations and the country's coastal oil storage facilities concentrated at Keamari.
Dr Asim's proposal only shifts that concentration to Hub where it will remain as convenient a target as Keamari but, presumably, the shift will protect naval installations. Does the Pakistan Navy want to be protected at such a cost? Surely, it doesn't. This plan (that proposes shifting all coastal oil storage facilities) envisages that, initially, the facilities will be used for storing imported crude and, later, refined products.
But what makes it odd is that this miracle is to occur in just 18 months. Do the planners know what it implies in terms of investment mobilisation, project completion, supply disruptions in the intervening period, and their impact on the economy as well as security? On April 11, this over-ambitious plan was discussed with the Oil Companies Advisory Committee (OCAC) to seek stakeholders' view thereon.
Overly occupied with providing feedback and the required facts and figures to the Supreme Court in the ongoing litigation against the government over continued high prices of petroleum products, OCAC has not yet found the time to respond to this proposal.
Unofficially, however, the oil industry sources have expressed strong reservation over the plan to shift oil storage facilities from Keamari to Khalifa Point. According to them, shifting of these massive facilities - an uphill task to begin with - would require fresh investment running into tens of billions of rupees; even if the industry can raise the money for it, the timeframe for project completion is wholly inadequate.
"Even in developed countries (with requisite skill and technology resources for it) shifting an oil storage facility of over half a million tons and the all systems and technology attached thereto envisages three to four-year timeframes to assure the new facility's being firmly in place, and its satisfactory testing for reliable delivery capability. If you overlook these criticalities, you take an unmanageable risk" said an oil industry guru.
In a country where delivery capability of almost every service is handicapped on the one hand by population rise-driven demand and on the other by inadequacy of requisite skills and infrastructure, fiddling with its oil storage facilities that may seriously undermine the already weak delivery capacity of most services (especially power generation) could compound the chaos that already appears beyond the state's capacity.
The oil industry has invested heavily over the years in its existing facilities and infrastructure, and the state too had invested taxpayers' money in connecting them to highways and railways through a costly network of roads, railway tracks, and bridges. Dr Hussain's plan (God alone knows why so hasty) proposes to write off this investment well before it has delivered its economic value. Can a country like Pakistan afford this luxury?
Un-named oil industry sources opine that, to begin with, the proposed plan for shifting the storage facilities would involve at least four to five years, but materialising this dream will depend on the future country risk perception and investment plans of the oil marketing companies and refineries. Atop thereof is the unending 'circular debt' that has left the industry coffers dry. Given the ongoing global financial crisis and Pakistan's high country risk perception, seeking foreign investment would be a tough ask.
Some in the oil industry wonder whether this is the time for such a venture. Keeping in view Pakistan's fragile political and economic conditions, this project shouldn't be the government's priority. Besides, Balochistan will remain a sensitive province until the federal government and the provincial leadership resolve the sensitive issue of autonomy within the frameworks of the federation and the constitution.
A minority in the oil industry points to a major inadequacy of the Karachi and Qasim ports - berthing facility for large ships; it also points to freight and time economies if crude and refined oil products are imported in huge tankers, and that the single-buoy mooring would help improve cost efficiency. But others in the industry consider both centralising storage and use of 'single-buoy mooring' as highly vulnerable options.
Security concerns [impliedly voiced by Pakistan Navy] over the presence of oil storage facilities in Keamari being too close to naval installations may be justified though Pakistan Navy has yet to make such a disclosure. Even then, the way to go about allaying these fears would be to strategically stagger the project over a longer period because both the Navy and the people must learn to survive together, not at each other's expense.
Assuming that this miracle does happen could these facilities exist in isolation? Is it realistic to assume that within 18 months the state (with all is fiscal headaches) could build, highways, bridges, railway sidings, traffic control mechanism, and what have you, in 18 months? Has this ever happened in the past? Can it happen now, given the instability Pakistan confronts due to a whole variety of social, political and security challenges?
Or will it be another grand mess? Everyone, especially Dr Asim Hussain must know that it amounts to day dreaming. By any stretch of imagination, neither the timeframe nor the Rs 15 billion worth of accumulated reserves with the oil refineries, courtesy the 'deemed duty' handouts [disclosed by the SC Judicial Commission headed by Justice Baghwandas] would be enough to materialise this dream.
Finally, even if the oil sector succeeds in arranging funds for this gigantic project, it would look to recovering this huge investment in the timeframe its financial experts consider justified. Since the cash-strapped Pakistani government is most unlikely to take on even a shred of that burden, consumers would end up paying its cost. How will this impact inflation and falling competitiveness of businesses in a recession, isn't hard to imagine.
Instead of shifting the oil storage facilities (most of them only half-way through their life cycles) scattered all over the Karachi coast, it would be far less expensive and disruptive to up-grade berthing facilities at Keamari and Qasim ports, and by all means building even deeper ones at Khalifa Point to diversify risk rather than centralise it at Khalifa Point.
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