Use of APL pipeline by Byco: foreign shareholders express serious concern over move

Foreign shareholders of Asia Petroleum Limited (APL) have expressed serious concerns over the possible use of APL pipeline by Byco refinery to transport its products, Business Recorder has learnt. APL is a joint venture of Pakistan State Oil (PSO) (Pakistan), Asian Infrastructure Limited (Singapore), VECO International Inc (Alaska) and Independent Petroleum Group (Kuwait).
APL was set up with support of World Bank and the government of Pakistan as an energy infrastructure company. Discussions have been taking place among Byco, PSO and APL on the possibility of using APL pipeline by Byco refinery to transport products. Sources said that there were serious reservations against this proposal by concerned parties, lenders and Hubco. There are many legal complications due to implementation agreements with Hubco and APL and guarantees given pursuant thereto.
"In view of these issues, APL does not currently view the proposal as commercially viable, and its foreign shareholders have expressed their reservations regarding any such arrangement," sources added. PSO and Byco refinery have the exclusive sale purchase-agreement for the upliftment of its entire production. Since the start of Byco operations in the last quarter of 2003, PSO has been lifting its products.
Byco is now constructing another refinery, with output capacity of 120,000 barrels per day, which is expected to commence its operations in the first quarter of 2011. Sale Purchase Agreement between PSO and Byco is under negotiation for lifting this production," sources said.
Hubco has opposed allowing Byco to use APL pipeline to transport white oil from the refinery in Hub to Karachi. Hubco says that any agreement between PSO and Byco would violate its right to exclusively use the pipeline till 2028. An agreement between PSO and Hubco was inked in 1998 that provided Hubco exclusive right to use APL pipeline for supply of furnace oil to its plants in Hub. Hubco has urged PSO not to enter into any agreement, fearing that it could risk fuel supply to Hubco plants.