KSA asks Pakistan to make China Sinopec part of $10bn green refinery project

ISLAMABAD: The Kingdom of Saudi Arabia (KSA) has asked Pakistan authorities to approach China’s Sinopec and also make it part of a $10 billion green refinery that is to be established in Pakistan.

“We have announced and notified the new green refinery policy with incentives of 7.5 per cent deemed duty for 25 years and a tax holiday of 20 years as per wishes of the KSA, but the required pace of progress needs some stimulation,” said sources.

The KSA also wants the engineering, procurement, and construction (EPC) contract to be awarded to China Sinopec, and to this effect, the Pakistan State Oil, nominated by the Government of Pakistan, is in contact with the Bank of China and China Sinopec.

Sinopec is also providing services to Saudi Arabia (rigs, well-service, geophysical exploration), pipeline, road and bridge, 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.

Meanwhile, authorities in the Petroleum Division have been asked by the Special Investment Facilitation Council (SIFC) to assess investment interest by Chinese company, Sinopec, in the green refinery alongside Saudi Aramco, and facilitate the company in case of an affirmation of its interests by expediting the necessary approvals.

The Petroleum Division has also been asked to identify other interested credible parties for investment in the refinery and the SIFC has also asked the Petroleum Division to update on the particular issue of paramount importance in the next Apex Committee, to be headed by prime minister and attended by chief of army staff (COAS), along with other cabinet members and senior government officials.

Once the mega refinery is established at Hub, Balochistan, it will produce 8 million tonnes of diesel and 6 million tonnes of gasoline with 5-euro specifications per year.

It may not be out of place to mention that earlier on July 27, 2023, the China Road and Bridge Corporation (CRBC) signed an MoU with the government to construct the mega Saudi-backed refinery of $10 billion in Pakistan based on the CPC-F model. Now the government is trying to allure Sinopec on the desire of KSA.

The refinery is to be constructed based on a 30:70 equity-loan ratio. The equity would be $3 billion and loans $7 billion. Saudi Aramco would share 50 per cent equity of $1.5 billion and the same 50 per cent equity will be shared by Pakistan in the project.

The remaining amount of $7 billion loans, the official said, would be arranged by Saudi Aramco through international financial institutions (IFIs). Besides, the CRBC under the MoU signed on July 27, 2023, would also arrange loans from Chinese banks under the Engineering, Procurement, and Construction (EPC-F) model. Out of the remaining 50pc on behalf of Pakistan, PSO will be having a share of 25-30 per cent, and OGDCL, PPL, and GHPL will have a 5 per cent share each. However, Pak Arab Refinery Company (PARCO) did not sign the MoU.

Saudi Aramco has already conducted the pre-feasibility study and marketing assessment and now it will conduct detailed feasibility of the project prior to launching the mega project. The Front End Engineering Design (FEED) will also be completed.

The new green refinery will be allowed to sell its products, as per the minimum Euro 5 specification notified by the Petroleum Division from time to time, to any marketing company including their own affiliates in the marketing and distribution sector in the country.

The refinery will be allowed to export surplus (with respect to domestic demand) petroleum products, subject to approval from OGRA; however, refineries can export the products with specifications that do not have domestic demand under intimation to OGRA and MEPD.