Pakistan convinces Saudi Arabia to set up $12bn refinery, petrochemical complex

The Shehbaz Sharif government has succeeded in persuading Saudi Arabia to revive a major project shelved during the PTI government and establish a state-of-the-art deep conversion refinery along with a petrochemical complex in Pakistan, a top official at the Energy Ministry told The News.

The official confided to the publication that a high-powered delegation of the kingdom, headed by Crown Prince Mohammad Bin Salman, is coming to Pakistan in the last week of November during which a formal announcement is expected in this regard.

The Pakistani side, according to the report, made huge efforts to persuade the kingdom to honour the MoUs and invest in Pakistan. Islamabad also put its weight behind Riyadh, which has locked horns with Washington over the cut in oil supply in the international market.

In February 2019, during the visit of Mohammad Bin Salman to Pakistan, Saudi Arabia signed MoUs for an investment of $21 billion in various sectors of the economy, including for the project of a deep conversion refinery and petrochemical complex with an investment of $12 billion.

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The Saudi oil giant Aramco also conducted a study in this regard which found that setting up a refinery in Gwadar was not feasible. However, it can be established at Hub, Balochistan, or near Karachi, the official said.

Later, when the ties of Imran Khan’s government got strained with Saudi Arabia, the top decision-makers of the kingdom virtually put MoUs of $21 billion on the backburner signed in February 2019, the official said.

Now in the latest scenario, the official said, the Ministry of Petroleum is working on an upgrade of the draft for the refining policy to allure investment for setting up new refineries. The government is making up its mind to offer the investors profitability at 14-15% against the offer of 9%, earlier offered in the draft for refining policy prepared by the PTI government, apart from increasing the tax holiday’s scope.

The government also wants investment from China for a refinery and to this effect, Prime Minister Shehbaz Sharif, during his upcoming visit to China, will offer Beijing to set up a refinery in Pakistan.

“Top mandarins of the Petroleum Division with input from existing refineries are very much busy upgrading the refining policy draft.” And to this effect, more meetings would be held with stakeholders. One of the top men of the sitting government is spearheading the drive to upgrade the refining policy draft to ensure the setting up of a new refinery of 300,000-400,000 barrels per day by Saudi Aramco.

The official said that the new refinery will be able to export 35-40% of POL finished product and the rest will be used to cater to the country’s needs.

The government is also working on setting up another state-of-the-art and deep conversion Parco Coastal Refinery (PCR) for $5-6 billion with a capacity to refine 250,000 million barrels per day (BPD) crude oil at Hub, Balochistan.

The Government of Pakistan, the official said, will have 60% shares and Abu Dhabi’s International Petroleum Investment Company (IPIC) 30% and OMV 10%.

Pakistan wants to offload some of its shares to China in PARCO Coastal Refinery at Hub.

The prime minister, during his visit to Beijing, will offer China to become a stakeholder in PARCO-2 and also invite Beijing to install a refinery in Gwadar based on the new refining policy.