ISLAMABAD: For the first time, Pakistan has initiated diplomatic endeavours to effectively persuade the Kingdom of Saudi Arabia (KSA) and Sinopec — one of the biggest Chinese companies known for installing refineries — to help materialise the dream of setting up $10 billion state-of-the-art and deep conversion refinery with the capacity to refine crude oil of 300,000 barrels per day (BPD).
“Pakistan’s ambassador in Saudi Arabia has been asked to approach the authorities in KSA to facilitate in taking the project forward. The Foreign Office has also been directed to assist in pursuing the project through diplomatic channels, particularly engaging the Sinopec in China to pursue it to become a part of the mega project,” relevant senior officials told The News.
“After PSO’s top management and top mandarins of Petroleum Division could not convince Saudi Aramco and get a go-ahead from Sinopec, the country’s top decision-making body SIFC has directed the Foreign Office to initiate effective diplomatic channels to help materialise the project.”
“The Pakistan government has already announced and notified the new green refinery policy with incentives of 7.5 percent deemed duty for 25 years and a tax holiday of 20 years as per the wishes of KSA, but the required pace of progress needs some stimulation.”
Earlier Saudi Aramco, the officials said, asked Pakistan authorities to award engineering, procurement and construction (EPC) contracts to China’s Sinopec and to this effect, the Pakistan State Oil, nominated by the Government of Pakistan, is in contact with the Bank of China and China Sinopec.
“Sinopec is also providing services to Saudi Arabia (rigs, well-service, geophysical exploration), pipelines, roads and bridges, and other EPC projects. Sinopec has been serving Aramco, SWCC, RC, and many Saudi local cities, and has earned a good reputation among clients. The authorities contacted Aramco to convince Sinopec to become a part of the project but the authorities didn’t get a response.”
Aramco, according to well-informed officials, in recent interactions with Pakistan authorities, has indicated that it has detached itself from the Saudi government and has achieved deregulation to a reasonable extent. This is why its management is no longer inclined to invest in the refinery business across the world. It says the refinery business is no more lucrative than it was in the past.
Country’s caretaker energy minister Muhammad Ali, talking to The News on November 16, 2023, had disclosed the same, saying that Saudi Aramco has shown interest in building a crude-to-chemical petrochemical complex in Pakistan instead of a green refinery, adding that Saudi Arabia had started keeping itself away from the refinery business and investment globally.
Under the given scenario, Pakistan authorities have decided in a last-ditch effort to launch diplomatic channels to materialise the green refinery project. The relevant authorities said that through diplomatic channels, the exchange of queries and answers about the project had been started with Sinopec.
The refinery is to be constructed based on a 30:70 equity-loan ratio. The equity would be $3 billion and loans $7 billion. Saudi Aramco would share 50 percent equity of $1.5 billion and 50 percent equity will be shared by Pakistan in the project.
The remaining amount of $7 billion loans, the official said, would be arranged by Aramco through international financial institutions (IFIs). Besides, the CRBC under the MoU signed on July 27, 2023, would also arrange loans from Chinese banks under the Engineering, Procurement, and Construction (EPC-F) model. Out of the remaining 50pc on behalf of Pakistan, PSO will have a share of 25-30 percent, and OGDCL, PPL, and GHPL will have a 5 percent share each. However, Pak Arab Refinery Company (PARCO) did not sign the MoU.
Aramco has already conducted the pre-feasibility study and marketing assessment and now it will conduct a detailed feasibility of the project before launching the mega project. The Front End Engineering Design (FEED) will also be completed.
The new green refinery will be allowed to sell its products, as per the minimum Euro 5 specification notified by the Petroleum Division from time to time, to any marketing company including their own affiliates in the marketing and distribution sector in the country.
The refinery will be allowed to export surplus petroleum products, subject to approval from Ogra. However, refineries can export the products with specifications that do not have domestic demand under intimation to Ogra and MEPD.
