France's Technip has received a letter of intent for the turnkey engineering, procurement and construction (EPC) contract for Pakistan's first private hydrocracker, to be built in Karachi.

The announcement was made during a groundbreaking ceremony in Karachi on 23 February, which was attended by Prime Minister Benazir Bhutto (MEED 24:2:95).

The estimated $550 million project is being sponsored as a joint venture between the State Petroleum Refining & Petrochemical Corporation (PERAC) of Pakistan and Crescent Petroleum Company. Other sponsors include Pakistan State Oil and Kuwait's Independent Petroleum Group. The sponsors have recently appointed a financial advisor and are evaluating a short list of refinery operators.

The hydrocracker complex has a planned capacity of about 35,000 barrels a day of reduced crude oil. It will be mainly composed of a vacuum distillation unit, a hydrocracker, a visbreaking unit and a hydrogen unit. The US' UOP Management Services is the project manager.

Technip's 36-month contract will become effective in the third quarter of 1995, when the financing for the project has been completed. The work will be worth between $375 million-400 million, depending on the inclusion of a 20-MW power station.

The Bank of Tokyo International in London has been given the mandate to raise the financing. This is expected to be closed in the third quarter of 1995. The major plank of the financing will be an export credit package, linked to Technip's contract.

The World Bank, which has been advising the sponsors, is considering providing financing from the Private Sector Energy Fund. Up to $130 million could be made available, but this depends on the size of the other loans. An appraisal mission is scheduled for April, according to World Bank task manager Mikail Mengesha.

The Asian Development Bank (ADB) may take an equity stake of about 10 per cent and provide financing of $40 million. The Islamic Development Bank (IDB) could provide lease financing of between $25 million-35 million. The National Development Finance Corporation (NDFC) is also expected to contribute. In addition, there may be some local currency lending from the local institutions.

The project sponsors are also considering a short list of up to five experienced oil refinery operators to run the refinery for an initial period of two years. The firm will be required to take a 20 per cent equity commitment to the project.