The government is likely to include $10 billion Saudi Aramco refinery project in framework of China Pakistan Economic Corridor (CPEC), well informed sources in Petroleum Division told Business Recorder.
Ministry of Foreign Affairs, sources said, has revealed that Pakistan Deputy Ambassador in Beijing met the President of Sinopec Engineering Group (SEG), Zhang Xinming, on December 22, 2023 with Jiang Zuobin, Deputy General Manager of International Business Division, Sun Songquan, Senior Manager of Procurement Division, and Yan Xiaoli Sr Commercial Manager of International Business Division.
During the meeting, the SEG was informed about Aramco’s proposal to include Sinopec as technical and equity partner in the Greenfield refinery and petrochemicals project.
The SEG resident was also briefed about the Greenfield Refinery policy incentives approved by the federal cabinet in April 2023. In response, he SEG expressed his gratitude and showed willingness to move things forward.
The sources said, in the light of meetings, Petroleum Division requested Power Division (being the convener of JWG on Energy) to include the Saudi Aramco Refinery Project in the agenda of the forthcoming meeting of JWG on Energy.
The sources further stated that the MoU for exploring investment opportunities in Refining and Petrochemical sector was signed between the Government of Pakistan and Saudi Arabia on February 17, 2019. A joint ministerial delegation visited Saudi Arabia in April 2019 wherein a confidentiality agreement was signed between PSO and Saudi Aramco on April 23, 2019.
On June 27, 2019 Prime Minister approved PSO’s nomination as the counterpart entity of Saudi ARAMCO and to sign NDA with Saudi Aramco. The Saudi interest later on dwindled in the project due to Covid-19 and economically uncertain situation of Pakistan.
After several rounds of meetings between PSO and Aramco, the latter put forward the following demands: (i) 7 .5 % diesel and gasoline deemed duty for the life of the project; (ii) reduction in crude oil and product tankage; (iii) third-party investments to reduce capex; and (iii) engagement of Chinese contactors to de-risk execution and investment.
Subsequently, Greenfield Refinery Policy 2023 was approved by Ministry of Energy (Petroleum Division) providing incentives to foreign investors in projects such as SARP in which the following request was accommodated: (i) 7.5% diesel and gasoline deemed duty for the life of the project (25 years).
Separately, owing to the demand of the Saudis to de-risk project investment, Board of Investment (BoI) on request of Petroleum Division forwarded a Letter of Interest (LoI) of China Road Bridge Corporation (CRBC) in Saudi Aramco Refinery Project.
After initial round of meetings of CRBC with PSO and PARCO, a MoU was signed and a local consortium comprising OGDCL, PSO, PPL and GHPL was formed and conveyed to the Saudi side. However, the Saudi side showed concerns at the capability of the local consortium, as well as, that of proposed Chinese participants, i.e., CRBC saying that the sponsors do not meet their expectations.
Sharing the latest update, sources said, Aramco on August 31, 2023 conveyed that Aramco’s policy has shifted from fuel-based refineries to petrochemical complex and that it would be unable to invest in a fuel-based refinery in Pakistan.
The sources; however, argued that although demand for petrochemical products, mainly Polyethylene and Polypropylenes exists in Pakistani market, it is not sufficient for economical sized (world-scale) plant. The Saudi side emphasised that Aramco is doing several joint projects with Sinopec in China, as well as, in KSA and therefore is expecting Sinopec as equity investor along with EPC plus O&M.
