Four leading state-owned companies of Pakistan have agreed to collaborate on a $10 billion Greenfield Refinery project to be jointly developed with Saudi Aramco at the strategic Gwadar port in Balochistan, according to Pakistan’s Minister of State for Petroleum Dr. Musadik Malik.
Pakistan State Oil (PSO), Oil and Gas Development Company Limited (OGDCL), Pakistan Petroleum Limited (PPL), and Government Holdings Private Limited (GHPL), on July 27, inked three memoranda of understanding to secure the necessary local equity for the multibillion-dollar oil refinery project with a capacity of around 300,000 barrels in Pakistan.
Highlighting the significance of the collaboration between Pakistan, Saudi Arabia, and Aramco, Malik said that they had held multiple rounds of talks to iron out the details and ensure a successful outcome.
“In our earlier discussions [with Saudi authorities] there were two issues, one was obviously, who are the other equity partners, so Pakistan firmly believed that if Pakistan thinks that this is a viable project, then Pakistan should put its own equity into the project,” Malik told Arab News on the sidelines of the MOU signing ceremony.
The companies also signed an engineering, procurement and construction (EPC) contract with Chinese company China National Offshore Oil Corporation during the MoU signing ceremony that took place at the Oil and Gas Development Company Limited head office. Malik said the Pakistan government had brought in the best Chinese company for the purpose of EPC contracts.
“We have already brought to the table world-class refinery EPC construction partners who are also going to take a position in the equity,” he said.
Equity: Pakistan announced a joint venture to facilitate Saudi investment after the reported reluctance of foreign firms to inject the entire equity into the multibillion-dollar refinery project. Now, PSO will contribute up to 30% equity, with Saudi firm Aramco injecting the initial 30% and the remaining will be contributed by the other state-owned companies.
About the local equity shares, Dr. Malik said, “So, we have put together equity partnerships in excess of 40 to 45 percent as of right now.”
Agreement with Chinese firm
Pakistan has also reached an agreement with a Chinese company for the construction rights for the project. The Pakistan State Oil (PSO) inked a Memorandum of Understanding (MoU) with the Chinese company to secure the engineering, procurement, and construction contract (EPC). This EPC was a crucial requirement set by Saudi Arabia for its $3 billion equity investment in the refinery project.
When was the Saudi project approved?
The $12 billion Saudi project, with a capacity to process 350,000-450,000 barrels of crude oil per day, was agreed upon during a visit of Saudi Crown Prince Mohammed bin Salman to Islamabad in 2019.
Processing capacity of oil refinery
The refinery is capable of producing 8 million tonnes of diesel and 6 million tonnes of gasoline annually, meeting the stringent Euro 5 specifications. The policy comes with attractive incentives, including a 7.5% deemed duty for a duration of 25 years and a tax holiday lasting 20 years.
The integrated refinery petrochemical complex will encompass several essential components, including marine infrastructure, a petrochemical complex, storage facilities for crude oil and refined products, utilities for refining processes, and a network of pipeline connectivity, among others.
In addition to the Saudi-backed endeavor, Pakistan’s government also engaged in discussions with the United Arab Emirates (UAE) and Azerbaijan to explore investment opportunities in the oil sector. These efforts demonstrated the country’s determination to strengthen its position in the global energy market and enhance its economic prospects through strategic partnerships and projects.
[…] collaboration aligns with Pakistan’s consideration of incorporating the $10 billion Saudi Aramco refinery project into the CPEC framework, with Aramco expressing interest in establishing a […]