ISLAMABAD: In an effort to build a $10 billion, state-of-the-art, deep conversion refinery capable of refining 300,000 barrels of crude oil per day (BPD) in Pakistan, Islamabad has begun a diplomatic campaign to win over Saudi Arabia (KSA) and Sinopec, a Chinese company that specializes in refinery installations. This news was reported by The News on Monday.
“The authorities in the Kingdom of Saudi Arabia have been requested to be approached by Pakistan’s ambassador to Saudi Arabia in order to facilitate the project’s advancement. Senior officials who were aware of the development informed The News that the Foreign Office has also been instructed to support the project’s pursuit through diplomatic channels, especially by encouraging Sinopec in China to pursue it and include it into the larger project.
Following the failure of PSO’s top management and Petroleum Division mandarins to persuade Saudi Aramco and secure approval from Sinopec, the nation’s highest decision-making body, SIFC, has instructed the Foreign Office to open efficient diplomatic channels in order to facilitate the project’s realization.
“In accordance with Saudi Arabia’s wishes, the Pakistani government has already declared and notified the new green refinery policy, which offers incentives of 7.5% deemed duty for 25 years and a 20-year tax holiday; however, the necessary pace of progress requires some stimulation.”
The authorities disclosed that, at the request of Saudi Aramco, Pakistan had already awarded China’s Sinopec the engineering, procurement, and construction (EPC) contracts. The Bank communicates with Pakistan State Oil, which is the government of Pakistan’s designated entity.
In addition, Sinopec offers geophysical exploration, well-service, rigs, pipelines, roads, bridges, and other EPC projects to Saudi Arabia. Sinopec has built a solid reputation with clients by providing services to Aramco, SWCC, RC, and numerous other Saudi local towns. In an attempt to persuade Sinopec to join the project, the authorities reached out to Aramco, but they received no answer.
Additionally, officials disclosed that Aramco had informed Pakistan that it had severed ties with the Saudi government and was now reasonably deregulated. They continued by saying that the management had mentioned this and had said they were no longer interested in making global investments in refineries as they were no longer profitable.
This was further supported on November 16, 2023, when acting Energy Minister Muhammad Ali said that Aramco was more interested in constructing a crude-to-chemical petrochemical plant in Pakistan than a green refinery. Additionally, he had verified that Saudi Arabia refrained from participating in worldwide refinery ventures and investments.
In light of this possibility, efforts to bring the green refinery proposal to reality have been made diplomatically. The competent authorities stated that Sinopec and them had begun exchanging questions and answers over the project through diplomatic channels.
The construction of the refinery will follow a 30:70 equity-to-loan ratio. There would be a $3 billion equity and a $7 billion loan.
50% of the project’s $1.5 billion equity would go to Saudi Aramco, and 50% would go to Pakistan.
The official stated that Aramco would arrange the remaining $7 billion in loans through international financial institutions (IFIs). Additionally, the Engineering, Procurement, and Construction (EPC-F) model loans from Chinese banks would be arranged by the CRBC in accordance with the Memorandum of Understanding agreed on July 27, 2023. PSO will receive a portion of 25–30% of the remaining 50% on behalf of Pakistan, while OGDCL, PPL, and GHPL will each receive 5%. The Memorandum of Understanding was not signed by Pak Arab Refinery Company (PARCO).
