The European Investment Bank is providing a USD 50 million loan (some EUR 44 million) to Pak Arab Refinery Limited (PARCO), for the construction of a pipeline to transport refined petroleum from Karachi to Mahmood Kot (KMK), near to Multan in Central Pakistan.
The 15 years-term loan, with 5 years grace period, will contribute some 10% of the total cost of the project. The 782 km pipeline will be built by PARCO's joint-venture Pak Arab Pipeline Company (PAPCO). It will help meet the growing demand for oil products, using an efficient and secure oil transport system. The Islamic Republic of Pakistan guarantees the loan, which is also backed by the European Union budgetary guarantee.
PARCO's existing KMK pipeline cannot be further expanded. PARCO competed and won an international tender to implement the new pipeline on a Build Own and Operate (BOO) basis. The project is designed to transport imported and locally refined petroleum products from the oil jetty at Port Bin Qasim near Karachi to Mahmood Kot, where the refined petroleum products will be received in storage tanks and transferred to the existing facility and/or to the PARCO's pipeline to Machike. It includes: a pumping and terminal station at Bin Qasim with pipeline connection to the oil jetty unloading system; a 26-inch diameter pipeline from Bin Qasim to a terminal station at Mahmood Kot; and an intermediate terminal and pumping station at Shikarpur.
The pipeline construction started in early 2003, and the commercial operation is scheduled to start in August 2004. Following the Bank's recommendations and changes of the environmental impact assessment (EIA) regulations in Pakistan, the promoter hired an independent consultant to undertake the additional environmental analysis required to arrive at a comprehensive final EIA, as would be considered appropriate in the EU. An independent environmental auditor has been appointed to verify compliance with the Environmental Management Plan during the project's implementation.
The loan is provided in the context of the EU co-operation policy with third countries. In Asia and Latin America (ALA), the EIB may lend up to EUR 2.48 billion during 2000-2006 to support capital investment projects implemented by subsidiaries of EU companies or joint-ventures between EU and ALA firms, or investment that results in environmental improvements or fosters regional integration. The EIB was set up in 1958 to finance investment furthering EU integration. It lends for regional development, infrastructure, energy, industry and environment. Outside the EU, the Bank contributes to the European development co-operation policy in some 130 countries in Central and Eastern Europe, the Balkans, the Mediterranean region, Africa, the Caribbean and the Pacific, Asia and Latin America.
In 2002, the EIB provided loans totalling some EUR 40 billion. The Bank borrows on the capital markets the funds for its lending. Its bonds have regularly been rated "AAA" by the leading rating agencies. The EIB can pass on to project promoters the excellent conditions it obtains on the markets. The EIB may finance up to 50 percent of project cost. On average it provides one third of the funding and co-finances investments with other institutions.