Govt drafts oil refining policy to seek $15bn from China, Saudi Arabia

KARACHI: Government has devised draft oil refining policy 2022 to attract up to $15 billion in investment from Saudi Arabia and China for setting up a new

refinery mainly, The News leant on Thursday.

“The work on the finalisation of the refining policy gained pace in the last few days and draft has been devised with the likely chances of giving it final touches in next week, when a meeting would be held on Monday,” sources privy to the development stated.

Prime Minister Shahbaz Sharif, who would leave for China next week, wants to take along the final draft of the refining policy to attract Chinese investment, while talks were also underway with Saudi investors to woo them, sources revealed.

The refining policy is comprised of two components with one related to existing local refineries and the other about the investment for the new refinery in the country.

Government has been emphasising upon the five local refineries to upgrade, and that requires huge capital investment of around $4 to $4.5 billion that refineries have to arrange from their equity or via funding from lenders on commercial terms.

For this, refineries were required to improve their balance sheets.

Besides upgrading local refineries, there was a need for an additional refinery with 300,000 to 400,000 barrel per day capacity, along with petrochemical at a cost of $10-15 billion to meet the country’s demand, which was being catered through imports presently, sources

said.

The establishment of the new refinery requires considerable lead time and huge investment for which a policy along with attractive incentives need to be offered.

Sources said that the new refinery would be CtoC (crude to chemical) refinery and Saudi Arabia and China “can afford to put in the huge investment for such a big project”.

They disclosed that Prime Minister Shahbaz Sharif would visit China in a few days, and he wanted to bring the investment from China in this sector by sharing with them the draft of this refining policy.

“Chinese are interested in the profit and they would invest if the return on investing for new refinery is promising,” the sources believed.

Likewise, Saudis were in a better position to invest in this sector because of strong petrochemical industry in their country.

According to sources, the work on the refining policy has been expedited after replacement of Secretary Petroleum Division Ali Raza Bhutta with Secretary Incharge Capt Muhammad Mahmood (retd).

“Three successive meetings have been held in the current week to finalise the refining policy and the forth one is scheduled for Monday to give it the final shape, which reflects the urgency on part of government to finalise it,” the sources said.