Govt convinces KSA to set up $12bn refinery, petrochemical complex

ISLAMABAD: The coalition government headed by Prime Minister Shehbaz Sharif has ultimately succeeded in persuading Saudi Arabia to install a state-of-the-art deep conversion refinery along with a petrochemical complex in Pakistan, the project that was shelved by the KSA during the PTI government, a top official at the Energy Ministry told The News.

The official said that a high-powered delegation of the Kingdom of Saudi Arabia, headed by the Crown Prince, is coming to Pakistan somewhere in the last week of November. The Crown Prince is visiting Pakistan at the invitation of Prime Minister Shehbaz Sharif. The Pakistani sidemade huge efforts to persuade the KSA to honour the MoUs and invest in Pakistan. The present government in Pakistan has also put its weight behind Saudi Arabia, which has locked horns with the United States over the cut in oil supply in the international market.

Interestingly, the Kingdom of Saudi Arabia signed in February 2019 MoUs for an investment of $21 billion in various sectors of the economy, including for the project of a deep conversion refinery and petrochemical complex with an investment of $12 billion. The said MoUs were signed when the Crown Prince of KSA Mohammad bin Salman visited Pakistan in February 2019 and at that time Imran Khan Niazi was the Prime Minister of Pakistan.

The Saudi Aramco also conducted the feasibility according to which it found that setting up a refinery at Gwadar was not feasible. However, it can be established at Hub, Balochistan, or near Karachi, the official said.

But later ties with the KSA started climbing down when the-then Prime Minister Imran Khan tried to make a bloc of Islamic countries with the consent of Turkey and Malaysia in the presence of OIC headed by Saudi Arabia. This endeavour of Imran Khan annoyed the top decision-makers of the KSA.

In another development, when Crown Prince Mohammad Bin Salman gave some gifts to the country’s ex-prime minister, including a costly wristwatch, the-then premier sold it to a shop in the UAE that had manufactured it on orders from the Saudi crown prince. The owner of the business outlet forwarded the same wristwatch to the Crown Prince. The sale of the watch also annoyed the Crown Prince.

Imran Khan, while going to the United Nations via Saudi Arabia, also used the personal plane of KSA’s crown prince, but badmouthed the KSA while interacting with some dignitaries in the UN. The KSA’s top functionaries called back their plane and the-then premier had to come to Pakistan on his own. “In the wake of the above developments, the KSA top decision-makers had virtually put MoUs of $21 billion on the backburner signed in February 2019,” the official said.

Now in the latest scenario, the official said, the Ministry of Petroleum is working on an upgrade of the draft for the refining policy to allure investment for setting up new refineries. The government is making up its mind to offer the investors profitability at 14-15 percent against the offer of 9 percent, earlier offered in the draft for refining policy prepared by the PTI government, apart from increasing the tax holiday’s scope.

The government also wants investment from China for a refinery and to this effect, Prime Minister Shehbaz Sharif, during his upcoming visit to China, will offer Beijing to set up a refinery in Pakistan.

“Top mandarins of the Petroleum Division with input from existing refineries are very much busy upgrading the refining policy draft.” And to this effect, more meetings would be held with stakeholders. One of the top men of the sitting government is spearheading the drive to upgrade the refining policy draft to ensure setting up of a new refinery of 300,000-400,000 barrels per day by Saudi Aramco. The official said that the new refinery will be able to export 35-40 percent of POL finished product and the rest will be used to cater to the country’s needs.

The government is also working on setting up another state-of-the-art and deep conversion Parco Coastal Refinery (PCR) for $5-6 billion with capacity to refine 250,000 million barrels per day (BPD) crude oil at Hub, Balochistan.

The Government of Pakistan, the official said, will have 60 percent shares and Abu Dhabi’s International Petroleum Investment Company (IPIC) 30 percent and OMV 10 percent. Pakistan wants to offload some of its shares to China in PARCO Coastal Refinery at Hub. The prime minister, during his visit to Beijing, will offer China to become a stakeholder in PARCO-2 and also invite Beijing to install a refinery in Gwadar based on the new refining policy.