Five Pakistani state-owned companies are set to collaborate with Saudi Arabia to execute a $10 billion refinery project in Pakistan.
Quoting sources, The Express Tribune, reported that Saudi firm Aramco was initially hesitant to inject the entire equity into the multibillion-dollar refinery project, leading the Pakistani government to decide on a joint venture with key Pakistani state-owned companies.
Under this plan, Pakistan State Oil (PSO), Pak Arab Refinery (Parco), Oil and Gas Development Company Limited (OGDCL), Pakistan Petroleum Limited (PPL), and Government Holdings Private Limited (GHPL) will contribute 70% equity, while Aramco will inject the initial 30% equity into the project.
The MoU to finalise the collaboration is set to be signed on Thursday (today), cementing the partnership between the two nations. Despite past tensions between Pakistan and Saudi Arabia, the project has gained momentum, with Pakistani authorities actively working on it and even receiving a visit from the Saudi Ambassador to Pakistan at the site of the proposed refinery in the Gwadar area of Balochistan.
The project had previously faced challenges due to strained relations between past governments of Pakistan and Saudi Arabia. However, the current Pakistani government, backed by the army chief’s support, has been actively promoting investment in Pakistan, seeking to attract foreign ventures.
The proposed joint venture will establish a mega refinery in Gwadar with a capacity of 400,000 barrels per day. The government of Pakistan has already approved a refinery policy for new projects in the country, including tax exemptions to encourage investors to set up refineries. However, it has yet to approve a refinery policy for existing refineries to facilitate the establishment of upgradation plants. Existing refineries in Pakistan claim that they can meet the country’s fuel demand if granted incentives under the new refinery policy for their expansion.
Apart from economic benefits, this partnership holds strategic significance in strengthening friendly ties with Saudi Arabia and the United Arab Emirates (UAE).
Both countries have previously provided financial support to Pakistan during periods of economic uncertainty, depositing dollars in the country’s central bank to help secure an International Monetary Fund (IMF) bailout package.
Pakistani authorities have recently awarded one terminal to the UAE, and plans are underway to award two other terminals in Karachi. These initiatives are not solely focused on attracting investment but also aimed at bolstering bilateral relations with these two Muslim countries.
Collaborative efforts between teams from Pakistan and Saudi Arabia have been ongoing since last year to finalise a commercial agreement on the refinery project, especially before Prime Minister Shehbaz Sharif’s visit to Riyadh.
