Four Pakistani state-owned petroleum companies have signed a memorandum of understanding with Saudi Arabia to build Pakistan’s largest oil refinery with an investment of USD 10 billion in the strategic Gwadar Port.
The MoU to set up the facility with a production capacity of 300,000 barrels per day was signed on Thursday with the state-owned Oil and Gas Development Company Ltd (OGDCL), Pakistan State Oil (PSO), Pakistan Petroleum Ltd (PPL), and Government Holdings Private Ltd (GHPL) signed the MoU to join hands and provide comfort to the Saudi firm to enter Pakistan with a major investment, the Dawn newspaper reported.
The four SOEs would join the project through equity participation.
The government headed by Prime Minister Shehbaz Sharif is reportedly in the advanced stages of negotiations with Saudi giant Aramco to execute the greenfield refinery project at the strategic Gwadar Port and wants to complete the initial paperwork before its tenure ends in two weeks.
The tenure of Pakistan’s current government will end on August 14.
To facilitate the Saudi investment in refining, the government has recently passed a new policy under which a new deep conversion oil refinery of a minimum of 300,000 bpd achieving financial close of the project within five years shall be eligible for a customs duty of 7.5 per cent for 25 years on petrol and diesel of all grades produced effective from the date of commissioning of the refinery.
The project envisions setting up an integrated refinery petrochemical complex with a crude oil processing capacity of a minimum 300,000 bpd along with a petrochemical facility.
The integrated complex shall comprise various components such as marine infrastructure, petrochemical complex, storage for crude oil and refines utilities, pipeline connectivity etc.
According to the Petroleum Division, despite being integral to the growth of the economy, no new refinery project has materialised in Pakistan for more than a decade and only two refineries have been added in the last 40 years.
Compared to the 20 million tonnes of refining capacity, the actual capacity utilisation is at around 11 million tonnes.