Pakistan oil companies collaborate with Saudi Aramco for $10bn refinery project

Four leading Pakistani oil companies will join hands with Saudi Arabia’s state-owned Aramco for a $10 billion Greenfield refinery project at Pakistan’s strategic Gwadar Port.
A Memorandum of Understanding was signed between the Pakistani and the Saudi companies in the capital, Islamabad last month, said a statement from the Ministry of Petroleum.
The Pakistani state-owned entities, Oil and Gas Development Company Limited, Pakistan State Oil, Pakistan Petroleum Limited and Government Holdings Private Limited (GHPL), will collaborate with Aramco through a “joint investment strategy”, the statement said, without providing further details.
The project envisions setting up an integrated refinery petrochemical complex with a crude oil processing capacity of a minimum of 300,000 barrels per day (BPD), along with a petrochemical facility in Pakistan, it added.
“The project will have significant foreign investment from world-class oil & gas giants through equity participation,” the statement further said.
Pakistan’s Minister for Petroleum, Musadik Malik, shared details of the project and “its benefits to the national economy by way of economic growth, foreign exchange savings, energy security, employment opportunities and social upliftment.”
Pakistan and Saudi Arabia inked a deal to establish an oil refinery in Pakistan’s south-western strategic port city of Gwadar, a key route of the multi-billion dollar China-Pakistan Economic Corridor (CPEC), during Saudi Crown Prince, Mohammad bin Salman’s visit to Islamabad in 2019.
According to experts, Saudi Arabia is mostly exporting its oil through its western ports on the Red Sea. Gwadar Port will give the Kingdom another option.
Musadik Malik says that negotiations with Saudi Arabia were at an advanced stage to execute a $10 billion green refinery project at the strategic Gwadar Port in Pakistan.
The Saudi Arabia oil firm showed a willingness to inject the initial equity into the multibillion-dollar refinery project, leading the Pakistani government to decide on a joint venture with key Pakistani state-owned companies.
PSO will inject up to 30 percent equity whereas the other state-owned companies will also contribute equity.
Aramco will inject the initial 30 percent equity into the project. He said the establishment of Greenfield Refinery will help decrease the trade deficit of the country.
Pakistan pays an $18 to $20 per barrel premium on diesel imports whereas the premium on crude oil stood at 1 to 2 dollars per barrel. This will be saving after the new mega refinery is set up in Pakistan, he says.
Musadik Malik said negotiations are underway with our friendly countries including Saudi Arabia, United Arab Emirates, and other member countries of the Gulf Cooperation Council for the import of cheap oil and gas to the country.
He said that UAE was also interested to join this mega refinery project.
The minister said that he had also met the president of Azerbaijan who also showed interest in this refinery project.
He said that terms and conditions would be finalized after the FID is finalized which would take around one to two years.
Regarding the government’s achievements during the past year, the minister said 138 Million Cubic Feet natural gas of worth $570 million was added to the gas system and $500 million of indigenous gas produced will soon be added. The minister said the dividends of the agreement signed with Russia for crude oil will reach the masses very soon. He said the incumbent government also resumed talks on the Turkmenistan-Afghanistan-Pakistan-India Gas Pipeline project, which was shelved by the previous government, while a framework agreement was signed with Azerbaijan for LNG procurement on flexible terms.
The minister said under the agreement, Azerbaijan will offer one cargo of LNG each month and it will be up to Pakistan to either accept the cargo or not. He said there will be no financial penalty if Pakistan does not accept the cargo. He said the government will also open schools and hospitals at all the places, where projects for oil and gas exploration will be launched to facilitate the local population. Secretary Petroleum – Captain (R) Muhammad Mahmood in his opening remarks shared salient aspects of the GreenField Refinery Policy and underscored the commitment of the Petroleum Division towards the development and growth of the petroleum sector.