State Petroleum Refining & Petrochemical Corporation (Perac) says its project to build an oil refinery in Baluchistan is on hold until the government releases details of reforms to the petroleum policy. The current policy guarantees returns on refinery projects. The government will secure a 25 per cent return on paid-in capital over eight years, providing the project becomes operational in 2000.

The existing policy guarantees return on investment in local currency, however this is now under review. Industry sources say that the government is seeking to establish a mechanism which will guarantee returns in foreign currency. Perac says its project will not progress until decisions on the policy have been taken.

The refinery, with a planned capacity of 6 million tonnes a year, is expected to be a joint venture with the National Iranian Oil Company (NIOC), Perac says. The company had held talks in late 1996 with potential alternative partners from Saudi Arabia and Malaysia, but now says it will implement the project with NIOC.

The company will invite rebids for the engineering design specification contract. Original bidders were The Parsons Corporation and UOP, both of the US, the UK's Babcock King-Wilkinson and the Netherlands office of the US' ABB Lummus Global. Parsons and UOP pulled out of bidding, however, due to US sanctions on Iran (MEED 6:9:96).