The sponsors of the $450 million hydrocracker to be built in Karachi have overcome an important hurdle by reaching a pricing agreement with the government. This has cleared the way for financing arrangements to be made for equity and debt financing of the project. Crescent Petroleum, the Sharjah-based private sponsor, with the local state-owned Petroleum Refining & Petrochemical Corporation (Perac), is expecting contractors to submit commercial bids by 10 January.

The pricing agreement fixes feedstock and output prices broadly in line with market prices. The hydrocracker is to sell its output according to prices specified in an existing contract between the government and Kuwait Petroleum Corporation, which fixes fuel oil at Arab Gulf fob plus $10 a tonne, and the price of other products at $2 higher a tonne. The price will be maintained under government control but is to be freed subsequently. An agreement with Pakistan Refinery, to be finalised by the end of the year, fixes the feedstock price at the level the hydrocracker will have to pay on imported feedstock.

The Asian Development Bank, which had been waiting for the agreements before considering possible involvement, is to visit Pakistan on a pre- appraisal mission in February. It will look at possible equity participation and concessionary lending. Negotiations are already going on with the UK’s Commonwealth Development Corporation and the Islamic Development Bank, which may take a share in the hydrocracker and provide $20 million of lease financing (MEED 5:11:93).

The sponsors are negotiating with five banks interested in leading the local currency syndication: the local state-owned Bankers Equity and National Development Finance Corporation, Citibank, ABN-AMRO Bank and Deutsche Bank.

Apart from the local syndication, foreign banks are likely to get involved only if export credit cover is sought by the contractors. Other debt financing will come from development institutions. The World Bank has pledged, but not yet formalised, a $135 million loan for the project.

Commercial bids for the project are to be submitted by 10 January. Snamprogetti of Italy, France’s Technip, and Amec of the UK with Dragados & Construcciones of Spain and the US’ The Ralph M Parsons Company submitted technical proposals in November (MEED 23:7:93).