A view shows the TransOcean Barents drilling rig, at around 120 km off the coast of Beirut, Lebanon. — Reuters/File
ISLAMABAD: The government has initiated work on an ambitious plan to establish an integrated oil city at Hub, Balochistan, featuring an offshore Single Point Mooring (SPM) facility, dedicated crude oil and petroleum product pipelines, and large-scale bonded storage infrastructure aimed at transforming the region into a major petroleum logistics and trading hub.
The proposed project is expected to provide Pakistan with additional capacity to handle large crude oil and petroleum product vessels while easing pressure on existing port infrastructure at Karachi and Port Qasim, where limitations restrict the berthing of very large vessels.
According to official sources, a consultancy firm Technique has been hired to conduct a basic feasibility study of the proposed structure required for oil city. The study will determine the technical and commercial viability of the project and advise the government on whether it should proceed with development of the required infrastructure.
The study is expected to be completed within two months, after which the government will decide on the next phase of the project.The proposed oil city will be developed on government land at Hub that was previously allocated to Parco for establishment of a coastal refinery. Instead of leaving the strategically located land underutilised, the government now plans to use it for a broader petroleum infrastructure project that can potentially bring together import handling, storage, pipeline connectivity and petroleum product distribution facilities.
During a recent visit to Karachi, the minister for petroleum and natural resources was briefed by Parco management on the proposed development. The company presented its concept paper for the oil city, following which the minister directed Parco to undertake the basic study and further develop the proposal.
Under the concept presented by Parco, a Single Point Mooring facility would be established offshore in deep water, allowing large crude oil tankers and vessels carrying finished petroleum products to discharge their cargo without having to enter shallow-water port facilities.
The SPM will be connected to the mainland through two dedicated pipelines.One pipeline will transport imported crude oil towards KPT’s Kemari facilities, while the second will carry finished petroleum products towards Port Qasim, with connectivity to the existing White Oil Pipeline network.
The proposed oil city is also being linked with the government’s renewed customs-bonded storage policy, under which petroleum companies and international traders will be able to store imported products in bonded facilities without immediately paying applicable duties and taxes, subject to the relevant regulatory framework.
Official sources said that bonded storage facilities are planned for Hub, while Gulf-based companies have expressed strong interest in developing petroleum storage facilities at strategic locations including Port Qasim, Kemari, Gwadar and Hub.
The government has also proposed bonded storage facilities for petroleum products at Kot Addu, Machike and Faisalabad, creating the possibility of a wider inland and coastal petroleum storage network.
Separately, Pakistan is moving towards developing a framework for establishing Strategic Petroleum Reserves (SPR) to strengthen the country’s energy security and reduce vulnerability to disruptions in international oil supplies.
Consultancy firm Wood Mackenzie has been tasked with conducting a comprehensive study for the proposed strategic reserves.The study will assess the technical feasibility, integrity, safety and operational requirements of potential strategic storage facilities. It will also examine international and regional models for petroleum reserves and assess policy, regulatory and institutional requirements for establishing such a system in Pakistan.
The consultancy will evaluate short-, medium- and long-term options for developing the country’s strategic petroleum storage capacity, including the scale and location of facilities and the most appropriate implementation model.
According to the scope of the study, legal, regulatory, financial, commercial and institutional arrangements will also be examined. The study is expected to consider potential public-private partnership (PPP) models for financing, developing and operating strategic storage facilities.
Wood Mackenzie will also assess whether existing petroleum infrastructure can be utilised for strategic storage, taking into account pipeline connectivity, transportation networks, import routes and other logistical requirements.