The project to build a hydrocracker in Karachi has run into difficulties, with the two partners disagreeing over whether their jointventure agreement has been terminated. The project was to be implemented by National Crescent Petroleum, a joint venture between Crescent Refining & Marketing Company – a subsidiary of the Shaijahbased Crescent Petroleum Company – and the local Petroleum Refining & Petrochemical Corporation (PERAC).
PERAC issued a termination of the jointventure agreement to Crescent, citing difficulties in raising finance as the reason for its decision. However, Crescent has denied that the project has encountered such difficulties Crescent added that the termination of the joint-venture agreement was not authorised by the ministry sponsoring the project – the Production Ministry – therefore making it legally invalid.
Final negotiations between the two partners concerning an implementation agreement were pending the outcome of a report, being prepared by Arthur Andersen of the UK. The report, which is due to be presented to the government within the next few weeks, will cover the benefits to Pakistan of developing the refining industry, and the incentives needed to attract foreign investment into the sector.
Crescent says that it expects the report to support the project and that it is committed to implement it ‘with or without PERAC’s participation’ However, local press reports have indicated that PERAC also wishes to implement the project and that the government is seeking a new partner. A final decision on the project is expected to be taken by the government after its evaluation of Arthur Andersen’s report. The cost of the project is estimated to have risen to $800 million, industry sources say.