ISLAMABAD: Pakistan has to face another setback in attracting foreign investment as China has shelved the Coastal Oil Refinery Project at Gwadar in strategically located Balochistan province, and has deleted it from the list of Financial Development Programme 2009-10 agreed between the two countries.

UAE state run International Petroleum Investment Company (IPIC) has already suspended the work on the Khalifa oil refinery project after the controversy with Pakistan government over the extension of Managing Director (MD) of Pak-Arab Refinery (Parco) Rasheed Jung’s tenure. Even after granting extension to Parco MD for one year, IPIC has not restarted work due to global recession.

Sources in Petroleum Ministry told Business Recorder that Chinese delegation, that recently visited Pakistan, has formally informed the government of Pakistan that there has been no progress on Coastal Oil Refinery project and, therefore, the project has been deleted from the list of Financial Development Programme for current financial year 2009-10 agreed between Pakistan and China. Sources were of the view that global recession has also forced the Chinese government to shelve the project.

The proposed Coastal Oil Refinery was part of China’s plan to invest $12 billion in multiple projects in Pakistan. The refinery was designed to reach a daily output of 60,000 barrels crude oil. During President Pervez Musharraf’s visit to China in February 2006, China had expressed interest in constructing an oil refinery in Gwadar with an output of refining 60,000 barrels crude oil per day.

After the visit, China was to submit a feasibility report to Planning Commission, but China did not provide the report and rather informed Pakistan that it would not be in a position to start work due to no progress on the project. Pakistan and China had also considered a feasibility study for an oil pipeline from Gwadar port to western China to bring oil from the Persian Gulf. This proposal has also been shelved after China’s refusal to set up oil refinery in Gwader, sources said.

Former President Pervez Musharraf had also offered a “trade corridor” to meet Beijing’s energy requirements and offered help for the construction of the strategic pipeline from Gwadar to its borders, enabling it to import oil from Saudi Arabia. China is heavily dependent on oil from the Gulf that currently passes via a very long route, through the Straits of Malacca under United States influence.

After this oil reach Shanghai, or the Chinese East Coast, it has to cover thousands of miles inland to west of China. By using Coastal Oil Refinery at Gwadar port, Karakoram Highway (KKH) could be much safer, cheaper and shorter route to west of China for oil transportation, a senior official said.

The biggest chunk of Chinese investment in Pakistan is for development projects in the country’s largest strategically located province Balochistan that also include the Saindak copper and gold project in Chaghi, and the lead-zinc-mining project in Lasbela district. Balochistan has been deprived of billions of dollars investment due to shelving of Coastal Oil Refinery Project by China that could generate employment for local people, the official said.

Source: Business Recorder