On Thursday, four Pakistani state-owned petroleum companies signed a memorandum of understanding (MoU) to facilitate a $10 billion Saudi investment in a new oil refinery at Gwadar, Balochistan.
The refinery will have a production capacity of 300,000 barrels per day, making it the first new refinery in over a decade and the largest in the country.
The government is currently in advanced negotiations with Saudi giant Aramco to execute the greenfield refinery project at the strategic Gwadar Port. They aim to complete the initial paperwork before their tenure ends in two weeks.
The MoU was signed by the state-owned Oil and Gas Development Company Ltd (OGDCL), Pakistan State Oil (PSO), Pakistan Petroleum Ltd (PPL), and Government Holdings Private Ltd (GHPL), who will join forces and provide comfort to the Saudi firm through equity participation.
The project’s vision is to establish an integrated refinery petrochemical complex with a crude oil processing capacity of at least 300,000 bpd, along with a petrochemical facility.
The integrated complex will include various components such as marine infrastructure, petrochemical complex, crude oil and refined product storage facilities, pipeline connectivity, and more.
The need for the refinery arises as no new refinery projects have materialized in Pakistan for over a decade, and the existing two refineries struggle to maintain optimal production levels due to the changing energy mix and fixed production slate. However, independent consultants forecast a significant increase in Pakistan’s demand for petrol and diesel by 2023.
To facilitate the Saudi investment in refining, the government has recently passed a new policy offering fiscal incentives such as a customs duty of 7.5% for 25 years on petrol and diesel produced by the new refinery. The refinery will also enjoy a 20-year tax holiday and exemption from various other levies and duties.