Circular debt: IPIC reluctant to resume work on KCR

Abu Dhabi oil giant International Petroleum Investment Company (IPIC) is said to be reluctant to resume work on multi-billion dollars Khalifa Coastal Oil Refinery (KCR) project with a projected output capacity of 250,000 barrels per day in Balochistan due to circular debt, Business Recorder has learnt.
The IPIC suspended work on KCR in January 2009 due to global recession and a row over management issue with Islamabad. Total cost of KCR has been estimated at around $6 billion. Sources said that the issue of KCR was taken up in the 126th meeting of the Board of Directors, chaired by Naveed Qamar, Minister of Petroleum and Natural Resources on October 7, 2010.
Parco was to hold 24 percent shares and IPIC the other 76 percent in the refinery to be built in the coastal area of Hub, Balochistan. Parco is a joint venture between the government of Pakistan and IPIC. Sources said that during the meeting, IPIC representative expressed serious concern over the rising circular debt which was compromising Parco''s ability to continue operations in Pakistan. The meeting was also informed that Parco was also facing problems due to non-payment of dues by Pakistan State Oil (PSO). "IPIC representative requested the Petroleum Minister to resolve the issue so that it could resume work on KCR," sources added.
Parco Board of Directors (BoD) in the 121st meeting held on October 5, 2009 had granted approval for initial funding of $500 million for KCR. It had also approved immediate release of $13 million to kick off subcontracting work related to the implementation of the KCR project. "After approval of funds by Parco, IPIC management decided to go ahead with the project in December 2009, but the circular debt issue became the major reason for a delay in the project," sources said.
Management of IPIC had suspended work on Khalifa oil refinery project after the controversy with Pakistan government over extension to Parco Managing Director Rasheed Jung. The Pakistan government granted Parco MD one-year extension, though IPIC management had sought two-year extension.
An accord on implementation of the Khalifa Coastal Refinery Project was signed at the Prime Minister House in Islamabad on November 13, 2007. Abu-Dhabi is also a partner in Parco. Abu-Dhabi has 30 percent equity in Parco. Parco is the country''s largest oil refinery with capacity of 100,000 barrels oil a day. Total refining capacity available in Pakistan is over 200,000 barrels per day.