Pakistan refinery project in limbo due to lackluster response from Saudi Aramco

• Aramco officials believe the refinery business is no longer profitable.
• Pakistan has indicated that it may reduce its equity in the project.
• Officials say Aramco is most interested in a petrochemical complex.

ISLAMABAD: Despite the government’s efforts to woo Saudi Aramco to develop a $10 billion state-of-the-art refinery and deep conversion, it appears the company is not interested in investing in the project, it said The news citing officials who spoke on condition of anonymity.

According to the publication, the deep conversion refinery, if it goes through, will have the capacity to refine 300,000 barrels per day (BPD) of crude oil.

Enticing Aramco to invest in the project has become a concern for Islamabad as the government announced a new green refinery policy with huge incentives of 7.5% deemed duty for 25 years and a 20-year tax holiday in line with the wishes of the Saudi government Arabia. , said senior officials familiar with the development The news.

“Now, top Saudi Aramco officials, in recent interactions with Pakistani authorities, have indicated that Aramco has distanced itself from the Saudi government and achieved deregulation to a reasonable extent. This is why its management is no longer willing to invest in the refining industry around the world. He says the refinery business is not as profitable as it used to be.”

The official said Pakistan has received an indication from Aramco that it may reduce its equity in the refinery to $900 million of the project’s total equity. The $900 million investment equals 30% of the $3 billion total equity in the project.

“Earlier, the total equity capital was estimated at $3 billion and from the beginning, KSA had indicated its willingness to invest $1.5 billion. The remaining equity of $1.5 billion was to be settled by Pakistan. As previously understood, Saudi Aramco was to lead the project and use its influence to arrange a $7 billion loan for the project. Now Pakistan has been informed that Aramco will not lead the project and the Pakistan government will have to arrange the loans on its own.”

The official claimed, “The current scenario may change after the general elections in Pakistan if the PML-N government is formed, led by Nawaz.”

He added: “Aramco has also developed a greater interest in setting up a petrochemical complex, rather than a refinery, and this has put the authorities on a fix.”

The government hoped to complete and commission the project under the engineering, procurement and construction finance (EPC-F) model. In the case of Pakistan, the project was planned to be completed with an equity ratio of 30:70, i.e. $3 billion in equity and $7 billion in loans.

Pakistan, during the Pakistan Democratic Movement government on July 27, had signed a memorandum of understanding with the China Road and Bridge Corporation (CRBC). According to the MoU, CRBC would participate in the refinery as a contractor and also arrange a reasonable amount of loans from Chinese banks for the mega project.

On the same date, four MoUs were also signed under which Pakistan State Oil would have a 25% stake in the country’s $1.5 billion equity capital, while Oil & Gas Development Company Ltd (OGDCL), Pakistan Petroleum Limited ( PPL) and Government Holdings Private Limited (GHPL) will have a 5% stake each.

Later, Riyadh asked Islamabad to approach China’s Sinopec and include it in the project. He asked that the engineering, procurement and construction (EPC) contract be given to the Chinese company.

In response, the PSO, which has been appointed by the Government of Pakistan, is in contact with the Bank of China and China Sinopec.

Sinopec also provides services in Saudi Arabia such as rigs, drilling, geophysical surveys, pipelines, roads and bridges and other EPC projects. Sinopec serves Aramco, SWCC, RC and many local cities in Saudi Arabia and has won a good reputation among customers as well as the Saudi people.