Refinery project faces uncertainty amid tepid Aramco response

INTERNATIONAL DESK: The setting up of a $10 billion state-of-the-art and deep conversion refinery with capacity to refine crude oil of 300,000 barrels per day (BPD) is in the doldrums as the vibes coming from Saudi Aramco are not up to the mark. They are all the more confusing as Pakistan authorities have notified the new green refinery policy loaded with huge incentives of 7.5 percent deemed duty for 25 years and a tax holiday of 20 years as per the wishes of the KSA (Kingdom of Saudi Arabia), senior officials privy to the development told The News.

“Now, top functionaries of Saudi Aramco, in recent interactions with Pakistan authorities, have indicated that Aramco has detached itself from the Saudi government and has achieved deregulation to a reasonable extent. This is why its management is no more inclined to invest in the refinery business across the world. It says the refinery business is no more lucrative as it was in the past.”

The official said this message has also been conveyed to the authorities in Pakistan between the lines when Aramco hinted that it may reduce its equity in the refinery to $900 million of the total equity of the project. The $900 million investment is equal to 30 percent of the total $3 billion equity in the project.

“Earlier, the total equity had been worked out at $3 billion and at the very outset, KSA had shown its willingness to invest $1.5 billion. The remaining equity of $1.5 billion was to be arranged from Pakistan. In the earlier understanding, Saudi Aramco was to lead the project and use its influence in arranging $7 billion loan for the project. Now Pakistan has been communicated that Aramco would not lead the project, and the government of Pakistan would have to arrange the loans on its own.”

The official claimed: “The current scenario can change after the general elections in Pakistan if PML-N government, headed by Nawaz, is established.”

He added: “Aramco has also developed greater interest in setting up a petrochemical complex, not in a refinery, and this has put the authorities in a fix.”

The project was to be completed and commissioned under the EPC-F (engineering, procurement, and construction-finance) model and, in the case of Pakistan, such a project is completed under a 30:70 equity loan ratio, meaning that $3 billion equity and $7 billion as loans.

Pakistan, during the Shehbaz government on July 27, 2023, had signed an MoU with CRBC (China Road and Bridge Corporation) under which CRBC would participate in the refinery as a contractor and would also arrange a reasonable amount of loans from Chinese banks for the mega project.

On the same date of July 27, from the Pakistan side, four MoUs were also inked under which PSO would have a share of 25 percent in the country’s equity of $1.5 billion whereas OGDCL, PPL and GHPL will have a 5 percent share each.

Later, the KSA asked Pakistan authorities to approach China’s Sinopec and make it part of the green refinery to be established in Pakistan.

The KSA also wants the engineering, procurement, and construction (EPC) contract to be awarded to China Sinopec and, to this effect, the Pakistan State Oil, nominated by the Government of Pakistan, is in contact with the Bank of China and China Sinopec. Sinopec is also providing services to Saudi Arabia including rigs, well-service, geophysical exploration, pipelines, roads and bridges, and other EPC projects. Sinopec has been serving Aramco, SWCC, RC, and many Saudi local cities, and has earned a good reputation among clients, as well as Saudi people.(ITN)