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Pakistan’s refinery project in doldrums due to Saudi Aramco’s lacklustre response

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10 months ago

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  • Aramco officials believe refinery business is no more lucrative.
  • Pakistan has been given hints that it may reduce equity in project. 
  • Officials say Aramco more interested in a petrochemical complex. 

ISLAMABAD: Despite the government’s efforts to woo Saudi Aramco for the development of a $10 billion state-of-the-art and deep conversion refinery it seems that the company is not interested in investing in the project, reported The News citing officials who spoke on the condition of anonymity.

According to the publication, the deep conversion refinery if it goes through would have the capacity to refine crude oil of 300,000 barrels per day (BPD).

To lure Aramco to invest in the project has become a concern for Islamabad as the government notified a new green refinery policy loaded with huge incentives of 7.5% deemed duty for 25 years and a tax holiday of 20 years as per the wishes of the Saudi government, 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 Pakistan was given a hint by Aramco 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% 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 the 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 government had hoped to complete and commission the project under the engineering, procurement, and construction-finance (EPC-F) model. In Pakistan’s case, it was planned that the project would be completed under a 30:70 equity loan ratio, meaning that $3 billion in equity and $7 billion as loans.

Pakistan, during the Pakistan Democratic Movement-government on July 27, had signed a memorandum of understanding with China Road and Bridge Corporation (CRBC). As per the MOU, 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, four MoUs were also inked under which Pakistan State Oil would have a 25% share in the country’s equity of $1.5 billion whereas Oil & Gas Development Company Ltd (OGDCL), Pakistan Petroleum Limited (PPL) and Government Holdings Private Limited (GHPL) will have a 5% share each.

Later, Riyadh asked Islamabad to approach China’s Sinopec and include it in the project. It requested that engineering, procurement, and construction (EPC) contract be given to the Chinese company.

In response, PSO, which has been nominated by the Pakistani government, 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.

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It is anticipated that 150 ships would arrive at Gwadar by the year 2045, allowing the port to handle fifty percent of all imports.

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3 days ago

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In an effort to strengthen the port’s economic importance, the Federal Government has made the decision to direct fifty percent of all imports from the public sector to Gwadar Port.

By taking this action, which has the backing of the Special Investment Facilitation Council, the port’s financial situation is going to be improved.

The Cabinet will be presented with a summary of imports through Gwadar by the Ministry of Maritime Affairs, which will take place after Prime Minister Shehbaz Sharif’s recent trip to China.

When the next Cabinet Meeting takes place, Ahsan Iqbal, the Federal Minister for Planning, Development, and Special Initiatives, will examine the Chinese offer for the Karachi to Hyderabad Section of the ML-1 Project and bring it to the Cabinet.

Company preparations for the Shanghai International Import Expo, which will take place in November 2024, are being made by the Board of Investment and the Ministry of Commerce of Pakistan.

One of the most important aspects of the China-Pakistan Economic Corridor is the Gwadar port, which serves as a significant commerce route connecting China, the Middle East, Africa, and Europe. At this time, the Gwadar Port is able to accommodate two huge ships, and by the year 2045, it is anticipated that it would be able to handle up to 150 ships.

By developing the Gwadar Port, regional connectivity would be improved, employment will be created, and international investment will be attracted.

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The price of gold in Pakistan has experienced a significant surge.

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3 days ago

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Gold prices in Pakistan surged significantly on Thursday following two consecutive days of decline, with the price per tola rising by Rs2,000 to reach Rs262,100. This increase was in accordance with the downward trend in international market values.

The All-Pakistan Gems and Jewellers Sarafa Association (APGJSA) reported that the price of 10 grams of 24-karat gold rose by Rs1,714, reaching Rs224,708.

Conversely, the world gold market experienced an upward trajectory. According to the APGJSA, the global price of gold surged to $2,503 per ounce following a $22 gain during the trading session.

The local market experienced a significant decline in silver prices, decreasing from Rs50 to Rs2,900 per tola after a prolonged period.

The local market’s gold prices remain subject to the ever-changing dynamics of the international market, as well as domestic considerations such as currency exchange rates and domestic demand.

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The government has not met the deadline set by the International Monetary Fund (IMF) for the approval of a $7 billion loan.

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4 days ago

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On Tuesday night, there were virtual talks between representatives of the Finance Ministry and the IMF delegation, with the main topics being external finance and income generation.

According to people familiar with the situation, no date has been set for the IMF’s Executive Board to approve the loan despite the ongoing negotiations.

Officials from the Finance Ministry informed the IMF mission about the government’s initiatives to get outside funding during the discussions. Updates on loan rollovers and fresh finance commitments from allies were included in this. According to sources, the IMF has received a schedule, and loan rollovers are expected to be finished by the end of next week.

The $12 billion in debt must be rolled over before the loan can be approved by the Executive Board, according to the IMF mission.

In the virtual discussions, representatives of the Federal Board of Revenue (FBR) conversed with the IMF team over the revenue deficit. The FBR must reach its revenue goals for this month, according to the IMF mission. As a result, the IMF has asked the FBR to submit a thorough strategy outlining how it will close the gap left by the shortfall and guarantee that revenue goals are reached.

Apart from the conversations on outside funding, there are rumors that the Finance Ministry is actively holding talks with commercial banks in order to obtain new funding. According to reports, negotiations are taking place with four distinct sources for commercial loans, which are anticipated to support the government’s overall financial plan.

Finance Minister Muhammad Aurangzeb disclosed on Tuesday that the IMF was in favor of introducing targeted subsidies. He said that qualifying recipients might receive these subsidies through the Benazir Income Support Programme (BISP).

In order to guarantee consistency, the minister announced that this week’s talks with chief ministers will focus on implementing a similar policy across the country. He was having a casual conversation in parliament with the journalists.

In response to queries about outside funding, Aurangzeb revealed a $2 billion deficit and said that talks to close this gap are progressing. He stressed how crucial it is to obtain business loans.

He went on, “At this point, there’s a need to secure an agreement for commercial loans, not exactly their issuance,” emphasizing that debt rollover negotiations are nearing their conclusion and doing well. The minister expected that these developments would shortly be reported to the governments of allied countries by relevant authorities.

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