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Pakistan’s refinery project in doldrums due to Saudi Aramco’s lacklustre response

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12 months ago

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  • Aramco officials believe refinery business is no more lucrative.
  • Pakistan has been given hints that it may reduce equity in project. 
  • Officials say Aramco more interested in a petrochemical complex. 

ISLAMABAD: Despite the government’s efforts to woo Saudi Aramco for the development of a $10 billion state-of-the-art and deep conversion refinery it seems that the company is not interested in investing in the project, reported The News citing officials who spoke on the condition of anonymity.

According to the publication, the deep conversion refinery if it goes through would have the capacity to refine crude oil of 300,000 barrels per day (BPD).

To lure Aramco to invest in the project has become a concern for Islamabad as the government notified a new green refinery policy loaded with huge incentives of 7.5% deemed duty for 25 years and a tax holiday of 20 years as per the wishes of the Saudi government, senior officials privy to the development told The News.

“Now, top functionaries of Saudi Aramco, in recent interactions with Pakistan authorities, have indicated that Aramco has detached itself from the Saudi government and has achieved deregulation to a reasonable extent. This is why its management is no more inclined to invest in the refinery business across the world. It says the refinery business is no more lucrative as it was in the past.”

The official said Pakistan was given a hint by Aramco that it may reduce its equity in the refinery to $900 million of the total equity of the project. The $900 million investment is equal to 30% of the total $3 billion equity in the project.

“Earlier, the total equity had been worked out at $3 billion and at the very outset, KSA had shown its willingness to invest $1.5 billion. The remaining equity of $1.5 billion was to be arranged from Pakistan. In the earlier understanding, Saudi Aramco was to lead the project and use its influence in arranging $7 billion loan for the project. Now Pakistan has been communicated that Aramco would not lead the project, and the government of Pakistan would have to arrange the loans on its own.”

The official claimed: “The current scenario can change after the general elections in Pakistan if the PML-N government, headed by Nawaz, is established.”

He added: “Aramco has also developed greater interest in setting up a petrochemical complex, not in a refinery, and this has put the authorities in a fix.”

The government had hoped to complete and commission the project under the engineering, procurement, and construction-finance (EPC-F) model. In Pakistan’s case, it was planned that the project would be completed under a 30:70 equity loan ratio, meaning that $3 billion in equity and $7 billion as loans.

Pakistan, during the Pakistan Democratic Movement-government on July 27, had signed a memorandum of understanding with China Road and Bridge Corporation (CRBC). As per the MOU, CRBC would participate in the refinery as a contractor and would also arrange a reasonable amount of loans from Chinese banks for the mega project.

On the same date, four MoUs were also inked under which Pakistan State Oil would have a 25% share in the country’s equity of $1.5 billion whereas Oil & Gas Development Company Ltd (OGDCL), Pakistan Petroleum Limited (PPL) and Government Holdings Private Limited (GHPL) will have a 5% share each.

Later, Riyadh asked Islamabad to approach China’s Sinopec and include it in the project. It requested that engineering, procurement, and construction (EPC) contract be given to the Chinese company.

In response, PSO, which has been nominated by the Pakistani government, is in contact with the Bank of China and China Sinopec.

Sinopec is also providing services to Saudi Arabia including rigs, well-service, geophysical exploration, pipelines, roads and bridges, 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.

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Dar chairs the CCOP meeting; Blue World’s bid offer of Rs.10 billion is rejected.

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2 days ago

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The Foreign Minister/Deputy Prime Minister chaired the Cabinet Committee on Privatization meeting.

Other committee members who attended the conference included the Federal Secretaries of several Divisions, the Ministers of Finance and Revenue, Industry and Food, Commerce, Power, and Privatization.

The CCOP took the PC Board’s recommendation into consideration and suggested that Blue World’s bid of 10 billion rupees for the sale of 60% of PIACL’s shares be rejected. The bid was rejected by the CCOP, who chose to follow the PC Board’s advice.

The government’s determination to sell out PIACL through government-to-government or privatization was reaffirmed by the CCOP.

The CCOP was pleased with the Aviation Division’s evaluation of PIACL’s sound financial standing.

Additionally, the CCOP established a committee, chaired by the Minister of State for Finance, to assess potential transaction possibilities for the privatization of the Roosevelt Hotel and the appropriate modes of adoption in light of existing legal rules.

Prior to its subsequent meeting, the CCOP also ordered that all difficulties be resolved and an agreement for the selling of services to an international hotel be concluded.

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The KSE-100 Index has surged by 790 points, resulting in an all-time peak for the stock exchange.

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2 days ago

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The benchmark KSE-100 Index increased by 790 points, marking a new all-time high for the Pakistan Stock Exchange (PSX) at 94,982 points.

The record-breaking performance underscores a surge of optimism and investor confidence in the stock market.

As investors responded to favorable economic signals, the market experienced a significant increase of over 500 points in early trading. Later, the KSE-100 Index reached another record level of 94,786 points after adding 594 points to its upward trajectory.

This positive development comes as the State Bank of Pakistan’s (SBP) foreign exchange reserves saw an increase of $84 million, reaching $11.26 billion during the week ending November 8, according to data released by the central bank on Thursday.

This represents an increase of 0.75% from the previous week. In addition, the nation’s total liquid foreign reserves experienced a modest increase, increasing by $33.7 million or 0.21% week-on-week to $15.97 billion.

In contrast, commercial banks’ reserves experienced a decline of $50.3 million or 1.06%, ultimately settling at $4.71 billion.

Furthermore, the economic team of Pakistan has expressed confidence in the discussions with the International Monetary Fund (IMF). Minister of State for Finance Ali Pervaiz Malik, in an exclusive conversation with Samaa TV, claimed talks were moving in a positive direction.

Highlighting improvements in Pakistan’s economic conditions, Malik noted substantial progress over the past six months to a year. He emphasized that Pakistan’s current economic situation has seen significant enhancement, with a reduced current account deficit of only $100 million in the first quarter, a reflection of the government’s strategy to increase remittances and boost exports.

Malik shared that discussions with the IMF are primarily focused on external financing, and while there have been speculations about a potential mini-budget or an increase in the petroleum levy, he clarified that these are currently premature considerations.

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Positive IMF negotiations propel KSE-100 Index above 94,000 points

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4 days ago

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As a result of investors’ optimism about the reported progress in the continuing talks with the International Monetary Fund (IMF), the Pakistan Stock Exchange (PSX) experienced a robust surge.

The benchmark KSE-100 Index of the PSX, which tracks market sentiment, rose 713 points to a new record high of 94,068 points, breaking above the 94,000-point barrier, as the trading session began.

Early in the day, the stock market began its upward trajectory as the KSE-100 Index steadily rose, gaining 574 points to reach 93,932 points. A possible agreement with the International Monetary Fund (IMF) might lead to more fiscal stability and back Pakistan’s economic reforms, which is why investors are so optimistic about the country’s future.

Officials from the Federal Board of Revenue (FBR) informed the International Monetary Fund (IMF) on Wednesday that the government would not be introducing a mini-budget and would instead continue to aim to collect Rs12,970 billion in taxes each year.

In line with continuing discussions with the Fund, FBR sources revealed that petroleum goods will not be subject to the General Sales Tax (GST).

The fact that Pakistan’s tax-to-GDP ratio has increased from 8.8% to 10.3%, a 1.5% gain viewed as a favorable sign of Pakistan’s fiscal policies, has reportedly pleased the IMF, who has voiced satisfaction at Pakistan’s recent economic performance.

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