Islamabad — Pakistan and Saudi Arabia are in talks to develop a 200,000-300,000 b/d oil refinery in Balochistan's Gwadar district for $10 billion -- a move that will help alleviate Pakistan's trade deficit, mounting foreign debt, and depleting foreign exchange reserves.
Receive daily email alerts, subscriber notes & personalize your experience.Register Now
The agreement is due to be signed in February, coinciding with an official visit by crown prince of Saudi Arabia Mohammad Bin Salman to Pakistan, and construction is set to commence by year end, said officials with the ministry of petroleum this week.
The project, led by state-owned Saudi Aramco, will be Saudi Arabia's biggest investment in the south Asian country, Pakistani Petroleum Minister Ghulam Sarwar Khan said, and will add to an investment boom in Pakistan's energy sector, particularly from China and Saudi Arabia.
Saudi Arabian companies have been looking to expand trade with their Pakistani counterparts, and invest in the country's mining, refining, petrochemicals and renewables such as solar and wind power generation, officials said. Several agreements will be signed within weeks, including power and petrochemical projects, said Haroon Sharif, Chairman with Pakistan's Board of Investment.
Saudi Arabia has also approved financial assistance to Pakistan worth $3 billion, of which $2 billion have been paid to help Pakistan shore up its foreign exchange reserves, Pakistan Finance Minister Asad Umar had said in October 2018. It has also approved the establishment of an oil credit system to facilitate the deferral of oil payments worth $3 billion, an official of the ministry of finance from Islamabad said January 14.
Platts Oilgram News brings fast-breaking global petroleum and natural gas news every day covering supply and demand trends, corporate news, government actions, exploration, technology, and much more. Click on the link below and we will set you up with a free trial.Free Trial
"Saudi Arabia wants to stabilize Pakistan's economic development through an oil refinery and partner with Pakistan as it gears up for the China Pakistan Economic Corridor," Saudi Arabia's Minister of Energy and the Chairman of the Board of Saudi Aramco Eng. Khalid A Al-Falih told reporters in Gwadar January 12, during a visit to the area allocated for the refinery.
Beijing has pledged $60 billion as part of the CPEC, which involves a collection of infrastructure projects, including power stations, highways, railways and ports, to help turn Pakistan into a major overland route linking western China to the international markets.
Around 85% of Pakistan's petroleum consumption of 22 million mt/year is currently being met via imports. Since 2015, an increasing share of Pakistan's gas consumption is also being met via LNG imports, which are set to hit nearly 16 million mt/year by 2024, according to S&P Global Platts Analytics.
The country's foreign exchange reserves are depleting fast because of heavy external debt, driven by a chronic trade deficit, which hit an all-time high of $37 billion in fiscal year 2017-2018.
-- Harris Zamir, firstname.lastname@example.org
-- Abache Abreu, email@example.com
-- Edited by Ikhhlaq Singh Aujla, firstname.lastname@example.org