ISLAMABAD:

Pakistan has taken a significant step towards commencing the construction of the $10 billion refinery in Balochistan by reaching an agreement with a Chinese company on Thursday, granting it the construction rights for the project. The Pakistan State Oil (PSO) inked a Memorandum of Understanding (MoU) with the Chinese company to secure the engineering, procurement, and construction contract (EPC), a crucial requirement set by Saudi Arabia for its $3 billion equity investment in the refinery project.

The investment in the new refinery project was linked to the requirement of raising equity by Pakistani companies and awarding the Engineering, Procurement, and Construction (EPC) contract.

The collaboration involves four leading Pakistani state-owned entities: Oil and Gas Development Company Limited (OGDCL), Pakistan State Oil (PSO), Pakistan Petroleum Limited (PPL), and Government Holdings Private Limited (GHPL). Through a joint investment strategy, these companies will work together on the Greenfield Refinery Project, with significant foreign investment from world-class oil and gas giants through equity participation.

The integrated refinery petrochemical complex is envisioned to have a crude oil processing capacity of at least 300,000 barrels per day (bpd) along with a petrochemical facility in Pakistan. The project will include various components such as marine infrastructure, a petrochemical complex, crude oil storages, refined utilities, and pipeline connectivity.

Secretary of Petroleum, Captain (R) Muhammad Mahmood highlighted the importance of the Greenfield Refinery Policy and reaffirmed the Petroleum Division’s commitment to the development and growth of the petroleum sector.

Minister of State for Petroleum, Musadik Masood Malik emphasised the benefits of the project to the national economy, including economic growth, foreign exchange savings, energy security, employment opportunities, and social upliftment.

Saudi Arabia’s willingness to inject the initial equity into the project has led the Pakistani government to consider a joint venture with key state-owned companies. PSO will contribute up to 30% equity, with Saudi firm Aramco injecting the initial 30% and the remainder will be contributed by the other SOEs.

The establishment of the refinery is expected to significantly decrease the country’s trade deficit. Savings are anticipated, as Pakistan currently pays a premium of $18 to $20 per barrel on diesel imports and a premium of $1 to $2 per barrel on crude oil imports.

In addition to the collaboration with Saudi Arabia, the Pakistani government is engaged in negotiations with other friendly countries, including the United Arab Emirates, for the import of cheap oil and gas. Several other member countries of the Gulf Cooperation Council have shown interest in the mega refinery project.

However, the government official clarified that the terms and conditions of the project are yet to be finalised, and this will be done after the Final Investment Decision (FID) is made, which may take around one to two years.

The minister added that natural gas worth $570 million has been added to the gas system, with an additional $500 million of indigenous gas production soon to be included. Agreements with Russia for crude oil will bring further dividends, and talks have resumed on the Turkmenistan-Afghanistan-Pakistan-India Gas Pipeline project. Furthermore, a framework agreement with Azerbaijan for LNG procurement on flexible terms has also been signed.

Published in The Express Tribune, July 28th, 2023.

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