Pak-KSA talks for $10.5bn mega refinery move forward

ISLAMABAD: Though the visit of Mohammad Bin Salman, the Crown Prince of the Kingdom of Saudi Arabia (KSA), has been postponed to the country, the dialogue between Islamabad and Riyadh at ministerial and experts levels has progressed to a reasonable extent for setting up an state-of the-art deep conversion mega refinery of $10.50 billion, one of the officials who were part of the talks told The News.

“The KSA side was asking for 7.5 percent deemed duty for 20-25 years, but Pakistan was offering 10 percent deemed duty for the first 10 years. However, there are visible signs that Pakistan has shown its willingness to accept the demand of Saudi Aramco for 7.5 percent deemed dirty for 25 years.”

Now under the new scenario after the deferment of the visit of Crown Prince earlier scheduled on November 21, 2022 whether the ongoing talks on the refinery will continue or not is the big question for authorities, the official said.

“PSO is the designated entity on behalf of Pakistan and Saudi Aramco is from KSA for talks on the refinery. Both sides were mandated to finalise the nitty-gritty of the deal before November 21, 2022.”

Prime Minister Shehbaz Sharif earlier visited Saudi Arabia on October 24 for a two-day visit where he took up the restoration of MoUs worth $21 billion, including the project of refinery and petrochemical complex of $10 billion earlier signed in February 2019.

However, under the new scenario, the petrochemical complex is no longer a part of the refinery project. And more importantly, KSA would not fully finance the refinery but also participate in the mega refinery project as a big stakeholder. According to the talks held so far, Saudi Aramco was being asked to join the project as the major investor. Saudi Aramco was asking for 7.5 percent deemed duty for 20-25 years and Pakistan has almost subscribed to the viewpoint of KSA.

If Saudi Aramco comes up with the major investor, then countries like China and UAE’s ADNOC would also come up with investment for the said project. The refinery will have the capacity to refine crude oil of 350,000-400,000 barrels per day. From Pakistan, Pakistan State Oil and Pak-Arab Refinery would also arrange the financing for the project.

“However, the structure of the consortium is to be finalised after the KSA and Pakistan finalise the deal on the refinery.” The official said that the existing refineries are getting the deemed duty for the last 21 years and there is no harm if investors like Saudi Aramco are ensured deemed duty for 20-25 years. This will ensure investment in the refining sector. He said the cost of the mega refinery with 400,000 barrels per day capacity has been worked out at $10.5 billion. The refinery will be established at Hub, Balochistan, which is near Karachi. Earlier, Saudi Aramco conducted a feasibility report and found that the refinery at Gwadar was not feasible. However, it would be feasible either in Karachi or near Karachi. The official said that at Hub, there is an NTDC system available for providing electricity to the new refinery.