Promoting Private Sector Investment

Feature | 31 January 2009

An innovative partnership between ADB and the Fauji Foundation helped establish Pakistan's first oil terminal and distribution facility.

Partnership in Progress

An innovative partnership between ADB and the Fauji Foundation in Pakistan has helped establish Pakistan's first and only oil terminal and distribution facility in the private sector - Fauji Oil Terminal & Distribution Company Limited (FOTCO).

In the early 1990s, a technical study conducted by ADB highlighted the need for an oil handling facility in Pakistan. Later, ADB provided a loan of $19 million for the establishment of an oil terminal and distribution facility on a build-operate-own basis. In 1993, ADB also approved an additional equity investment of $1 million, and arranged a complementary cofinancing loan of $25 million for the FOTCO project.

ADB's investment has now matured into a flourishing oil distribution facility that is handling about 4 million tons each of high furnace oil (HFO) and high speed diesel, and three quarter of a million ton of crude annually.

"ADB played a critical role, not only in financing the project but with facilitating the dialogue between investment partners," says Ali Abbas, secretary of the FOTCO board of directors. "ADB's strong relations with the Government were instrumental in driving the project forward through difficult negotiations to the stage where it stands at the moment."

Located at Port Qasim about 35 kilometers to the east of Karachi, FOTCO - currently the largest petroleum handling facility in the country - serves as the front-end of Pakistan's entire thermal power sector.

Presently, it houses a jetty capable of handling up to 75,000 deadweight ton vessels, and has one 36-inch diameter product pipeline for HFO and one 30-inch diameter pipeline for handling high speed diesel and crude oil, three 16-inch diameter-loading arms, and a 4-kilometer long trestle connecting the jetty with the shore.

Equipped with state-of-the-art fire sensing and/or extinguishing technology, the terminal and staff are fully capable of mitigating risks. FOTCO is currently owned by Fauji Foundation of Pakistan and INFRAAVEST Limited of Hong Kong, while National Bank of Pakistan and Banker's Equity Limited owns partial equity.

An Environment-Friendly Facility

FOTCO is located in an environmentally sensitive area, comprised of lush green mangrove forest and an array of marine life such as fish and shrimp. In winters, the site is also a favorite destination of trans-Siberian migratory birds.

"We are conscious of the environmental significance of the area, and have been working with many local and international conservation organizations, like the International Union for Conservation of Nature, to preserve the sensitive natural surroundings. In addition to protecting the existing mangroves, we have set up a nursery to grow mangrove plants which are being planted in the vicinity to contain soil erosion," says Hassan Sobuctageen, senior manager, operations and technical services.

The facility is maintaining high standards in environmental safeguards, and follows a zero-spill record policy. "You can see, although our jetty has been in use since 1995 and has been handling large volumes of oil, it is as clean as a slate. We receive tremendous appreciation from our clients and captains of visiting ships for the hygiene and maintenance standards," Sobuctageen adds proudly.

Fully operated by local engineers and technicians, FOTCO is an ISO-certified organization for quality management, safety and operational standards.

The Way Ahead

"We are optimistic about future prospects. The terminal is designed to provide for three additional berths and four product pipelines that can be built in a short span of time to meet future oil handling requirements. We feel that FOTCO is well positioned to maintain its leadership in the sector in foreseeable future," says Masood A. Bhatty, FOTCO's business development manager.

FOTCO is capable of handling 9 million tons of oil per annum with a growth potential of more than 27 million tons. It has the capacity to handle various types of petroleum products including diesel, HFO, and crude, but to build on its overall oil handling capacity, FOTCO is planning to add a new berth, with a price tag of about $65 million, in anticipation of growing oil handling demands.

"Presently, FOTCO is handling white oil and HFO for transportation to northern parts of the country and for power plants respectively. In addition to this, it is also catering to crude oil handling needs of the country. FOTCO is working closely with partners, particularly with the government departments concerned to enhance its infrastructure and service capabilities. This, FOTCO believes, can be done by maintaining a robust business development strategy aimed at promoting investment on commercial basis," adds Bhatty.

FOTCO terminal is set to play an important role in Pakistan's maritime operations by providing a safe, efficient, and smooth handling of the country's fuel requirements.

Timely completion of the project and operational success enabled FOTCO to repay ADB loans before the actual maturity date. ADB has now divested its equity, and the facility stands out as another successful model for ADB's private sector investment in Pakistan.