According to well-informed sources within the Petroleum Division, the government is considering the inclusion of the $10 billion Saudi Aramco refinery project within the framework of the China Pakistan Economic Corridor (CPEC).
A meeting held on December 22, 2023, between Pakistan’s Deputy Ambassador in Beijing and key officials from Sinopec Engineering Group (SEG) discussed Aramco’s proposal to involve Sinopec as a technical and equity partner in the Greenfield refinery and petrochemicals project.
The SEG expressed willingness to move forward after being briefed on the Greenfield Refinery policy incentives approved by the federal cabinet in April 2023.
As a result, the Petroleum Division requested the Power Division to include the Saudi Aramco Refinery Project in the agenda of the forthcoming meeting of the Joint Working Group (JWG) on Energy.
The Memorandum of Understanding (MoU) for exploring investment opportunities in the Refining and Petrochemical sector was signed between Pakistan and Saudi Arabia on February 17, 2019. Despite initial enthusiasm, Saudi interest waned due to the COVID-19 pandemic and economic uncertainties in Pakistan.
Following demands from Saudi Aramco, the Greenfield Refinery Policy 2023 was approved, providing incentives to foreign investors, including a 7.5% diesel and gasoline deemed duty for the project’s lifespan.
Despite efforts to de-risk project investment by involving Chinese contractors and forming a local consortium, concerns were raised by the Saudi side regarding the capability of the consortium and proposed Chinese participants.
In the latest development, Aramco conveyed its shift in policy towards petrochemical complexes, signaling its inability to invest in a fuel-based refinery in Pakistan. However, Aramco expressed expectations for Sinopec’s involvement as an equity investor, along with providing engineering, procurement, construction, and operations management (EPC plus O&M) services.
While demand for petrochemical products exists in Pakistan, it may not be sufficient for a large-scale plant, prompting Aramco to seek collaboration with Sinopec for investment viability.
