Riyadh asks Islamabad to approach China’s Sinopec for $10 billion green refinery project

• Riyadh wants the EPC contract to be given to Sinopec.
• The Petroleum Directorate asked to evaluate Sinopec’s investment interest.
• SIFC requests the department to facilitate the Chinese company if it is interested.

Islamabad: Saudi Arabia has asked Islamabad to approach China’s Sinopec and make it part of the $10 billion green refinery to be set up in Pakistan, it said The news on Sunday.

“We have announced and communicated the new green refinery policy with incentives of 7.5% deemed duty for 25 years and a 20-year tax holiday as per the wishes of Saudi Arabia, but the required pace of progress needs some boost,” sources said.

Riyadh also wants Sinopec to be awarded the engineering, procurement and construction (EPC) contract. According to the request, Pakistan State Oil, proposed by the Pakistani government, is in contact with the Bank of China and Sinopec.

Sinopec also provides services in Saudi Arabia (drilling, well servicing, geophysical exploration), 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.

Meanwhile, the Special Investment Facilitation Council (SIFC) has instructed the Petroleum Directorate to evaluate Sinopec’s investment interest in the green refinery along with Saudi Aramco. If the Chinese company is interested in investments, the council also tasked the department to facilitate them by expediting necessary approvals.

Apart from this, the Department of Petroleum has also been asked to identify other interested credible parties for investment in the refinery and brief on the particular issue of utmost importance in the next SIFC Summit Committee meeting.

Once the large refinery is installed in the Balochistan Hub, it will produce 8 million tonnes of diesel and 6 million tonnes of petrol of €5 specification per year.

On July 27 this year, China Road and Bridge Corporation (CRBC) signed a memorandum of understanding (MoU) with the government to build the large Saudi-backed refinery under the Engineering, Procurement, and Construction (EPC-F ). . But now the government is trying to bring Sinopec in the interest of Saudi Arabia.

The refinery is to be built on a 30:70 equity-to-debt ratio. Equity will be $3 billion and loans $7 billion. Saudi Aramco will share 50% of the equity of $1.5 billion and Pakistan will share the same 50% in the project.

The remaining $7 billion in loans, the official said, will be arranged by Saudi Aramco through international financial institutions (IFIs). Besides, CRBC under the MoU signed on July 27 would also arrange loans from Chinese banks under the EPC-F model. Of the remaining 50% on behalf of Pakistan, PSO will hold 25%-30% stake and OGDCL, PPL and GHPL will hold 5% stake respectively. However, Pak Arab Refinery Company (PARCO) did not sign the MoU.

Saudi Aramco has already carried out a pre-feasibility study and market assessment and will now carry out a detailed feasibility study of the project before it starts. The Front End Technical Design (FEED) will also be completed during the process.

The new green refinery will be allowed to sell its products, as per the minimum Euro 5 specification notified by the Petroleum Directorate from time to time, to any marketing company including its own marketing and distribution subsidiaries in the country.

The refinery will be allowed to export excess (relative to domestic demand) petroleum products, subject to approval from OGRA. However, refiners can export the products with specifications that have no domestic demand subject to notice to OGRA and MEPD.