close
Friday May 24, 2024

‘Saudi Arabia to invest in integrated refinery with products buyback assurance’

By Tanveer Malik
May 11, 2024
This photo on April 1, 2023, shows a view of installations of an oil refinery.—AFP
This photo on April 1, 2023, shows a view of installations of an oil refinery.—AFP

KARACHI: Saudi Arabia has agreed in principle to invest in an integrated refinery in Pakistan, with a "buy back" guarantee for the products, Petroleum Minister Musadik Malik said.

“This will be a tripartite investment in a refinery with Saudi, Chinese, and Pakistani investment,” said Malik told a group of journalists in his office and shared details about the Saudi investment in Pakistan, particularly in reference to the recent visit by a Saudi delegation to the country.

An integrated refinery is commonly known as a “crude to chemical” refinery, which mainly produces chemicals along with diesel.“The refinery is an old concept, and time has changed; the new concept is the integrated refinery, and Saudi investment will be in an integrated refinery,” he replied when asked about the investment in the refinery sector.

He said that the new integrated refinery would be set up with the “Buy Back” option so it will export the surplus products to sell in the global market. Petroleum minister said that the Saudi group has the expertise and skills to trade in the global oil and chemical market, so this option has been considered.

Also, the Chinese company, which has the experience and expertise in constructing and running a refinery, would be part of this new integrated refinery, he said. The minister said that the new integrated refinery involves more than a $10 billion investment.According to people familiar with the development, the Chinese company will be the Engineering, Procurement, & Construction (EPC) contractor and will also be doing the operation and maintenance work.

People in the oil sector say that an integrated refinery produces chemical and diesel products. As Pakistan is a small market, the demand for chemicals in the country is not so high. So, the surplus quantity would be exported.

They said that an integrated refinery doesn't produce petrol as the new technology in the refinery sector excludes petrol because its utility is short-lived after the rapid growth of electric vehicles in the world.

However, oil sector experts expressed skepticism about the progress on the new plan, citing the lack of a policy on "crude to chemical" refineries in Pakistan and the need for comprehensive commercial and feasibility studies to ensure the refinery's financial viability.

They said that Saudi Arabia first desired to establish a Greenfield Refinery and a policy was announced and worked out, but then they abandoned the project and now the talks have been held on an integrated refinery. They said that an integrated refinery would require comprehensive commercial and feasibility studies to forecast the demand and production as well as the export potential to keep the refinery operations financially viable.