The Kingdom of Saudi Arabia (KSA) has called upon Pakistani authorities to involve China’s Sinopec in expediting the establishment of a $10 billion green refinery in the country, according to recent reports. The KSA has expressed a desire for the engineering, procurement, and construction (EPC) contract to be awarded to China Sinopec, further emphasizing their interest in collaborating with the renowned Chinese entity.
Amid these developments, Pakistan State Oil (PSO), nominated by the Government of Pakistan, is actively engaging with the Bank of China and Sinopec to facilitate the project’s progress. Sinopec, known for its extensive experience in various sectors, has previously provided services to Saudi Arabia in areas such as rig services, well servicing, geophysical exploration, and pipeline construction, among other notable EPC ventures.
The Executive Committee (EC) of the Special Investment Facilitation Council (SIFC) has instructed the Petroleum Division to assess Sinopec’s potential involvement in the green refinery project, alongside Saudi Aramco. This directive was issued during the EC’s recent meetings held on October 23 and 24, 2023, at the Prime Minister’s Office, signifying the strategic significance of this collaboration to the parties involved.
Furthermore, the EC has directed the Petroleum Division to identify additional reputable entities interested in investing in the project and to provide comprehensive updates to the Apex Council (AC) in the forthcoming meeting.
With a focus on bolstering refining capacity, the EC has tasked relevant ministries, divisions, and authorities in the petroleum sector to evaluate the resource and investment requirements for both greenfield and brownfield refinery projects.
The proposed refinery, slated to be located in Hub, Balochistan, aims to produce 8 million tonnes of diesel and 6 million tonnes of gasoline annually, adhering to stringent 5-euro specifications, indicating a significant stride towards sustainable and environmentally conscious production.
Previous developments include the signing of a memorandum of understanding (MoU) between the Pakistani government and the China Road and Bridge Corporation (CRBC) on July 27, 2023, to construct the Saudi-backed refinery based on the CPC-F model. Now, with the involvement of Sinopec at the behest of the KSA, Pakistan is actively pursuing an inclusive and collaborative approach to further advance this ambitious project.
The equity-loan ratio for the refinery project is projected to be 30:70, with $3 billion allocated to equity and $7 billion to loans. Notably, Pakistan and Saudi Aramco are expected to hold 50 percent equity each, amounting to $1.5 billion each. Additionally, Saudi Aramco plans to secure the remaining $7 billion in loans through international financial institutions, while the CRBC is poised to arrange loans from Chinese banks under the engineering, procurement, and construction (EPC-F) model.
PSO is expected to maintain a 25-30 percent equity share, while OGDCL, PPL, and GHPL are anticipated to hold a 5 percent share each. However, the Pak Arab Refinery Company (PARCO) did not sign the initial MoU.
Saudi Aramco has undertaken a pre-feasibility study and marketing assessment and plans to proceed with a detailed feasibility study, with Front End Engineering Design (FEED) set to follow before the project’s full-fledged launch. The ongoing efforts underscore a collaborative approach aimed at achieving sustainable and impactful development within Pakistan’s energy landscape.
