Home ECONOMY Pakistan asked to bear transportation cost of Gwadar oil refinery project

Pakistan asked to bear transportation cost of Gwadar oil refinery project

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Pakistan asked to bear transportation cost of Gwadar oil refinery project
  • The country will require a huge amount to ensure timely completion of pipelines between Gwadar and Karachi, and Gwadar and Nawabshah

ISLAMABAD: As Pakistan and Saudi Arabia have agreed to sign the important agreement of building an oil refinery in Gwadar at a cost of $5-6 billion, Islamabad will at least be needed to shoulder the cost of transportation of oil from the proposed refinery.

According to sources familiar with the background talks between the two countries ahead of Crown Prince Mohammed Bin Salman’s visit, the Saudi officials have informed that it would be Pakistan’s responsibility to install gas pipelines needed for the transportation of the refined oil.

Although Islamabad has agreed to fulfill the obligations, it would require a huge amount to ensure timely completion of the pipeline projects between Gwadar and Karachi, and Gwadar and Nawabshah, they added.

According to sources, the Saudi side, while agreeing to sign a memorandum of understanding (MoU) to set up a petrochemical complex along with the refinery, has also asked Pakistan to share the feasibility study of the complex so that a final decision with regard to additional investments could be taken.

The cost of the two projects may collectively jump to over $10 billion. However, the two countries would jointly complete the feasibility study of the refinery project within two years’ times.

Sources said if the oil refinery is built in Gwadar, it would facilitate Pakistan with 250,000 to 300,000 barrels per day.

It is pertinent to mention that Pakistan is extending all facilities, including tax incentives, to facilitate Saudi investment in the project. Pakistan had already announced tax incentive package to UAE-based Abu Dhabi Petroleum Investment Company, encouraging it to establish a similar oil refinery along the coast of Hub (Balochistan) with a production capacity of 100,000 barrels per day.

Pakistan wants to build the oil refinery near the deep-water port of Gwadar to reduce import of petroleum products. As per the officials of the Ministry of Planning and Development, the country can reduce petroleum import bill by $16 billion if it imports cheaper crude oil to refine instead of expensive finished products.

“If we set up a refinery and fulfill Pakistan’s requirement through the said refinery, the oil import bill could be cut by half,” said the officials.

Last year, Pakistan had invited Saudi Arabia to invest in the projects related to China Pakistan Economic Corridor (CPEC), of which the Gwadar port is an integral part.

Earlier, the Saudi delegation, led by energy advisor Ahmad Hamed Al-Ghamdi, had visited Gwadar and, according to Petroleum Minister Ghulam Sarwar Khan’s claim, had shown an interest to immediately invest in the refinery.

“We sat down and held initial discussions with them and it was principally decided by both sides that it will be a government-to-government agreement,” the petroleum had stated.

6 COMMENTS

  1. TWO years for just feasibility study !! Wow.

    This refinery will be going the same way Iran-Pakistan-India pipeline has gone ..

    I loved the way Saudi Arabia is kidding Pakistan …

    — Liang Zhang, Jilin/CHINA

    • Add another 5-7 years for construction and it will be 2026-2028.
      By 2030, when 50% cars will be electric, this will not be feasible.

  2. It doesn’t make economic sense to put any size refinary in Gwader, let alone the refinary with capacity equivalent to the refining capacity of entire country.

    It would cost billions of dollars to setup and operate pipeline to Karachi. Why don’t then just build it in Karachi where such infrastructure already exist.

    • Good question Saleem, Maybe the rationale is that
      1. Gwadar will become a new hub for regional trade and transport. You know Pakistan may benefit from becoming a transitional hub for connecting China, Central Asia, Russia with Rest of the World through Arabian Sea.

      2. Redundancy I guess. Karachi has already an established port infrastructure but in case of any issue with anything (blockade, terrorism, choking) than Gwadar will be able to sustain the economic inflows and outflows.

      Main issue is that Pakistan need to find resources for study and pipeline infrastructure.

    • I’m from Karachi & Urdu Speaking (background from Bihar) !!! Don’t see it from the regional eyes. See it from the national eyes as a patriotic Pakistani. Gwadar & Balochistan has immense potential to become economic hub like Gulf. Karachi is already saturated & already HIGH HDI, what Pakistan need is to boost / up-lift its backward and poor areas. North Punjab, Central Punjab & Karachi are the 3 most developed regions within Pakistan, so further focusing these areas will never help Pakistan to come out of poverty, In order to counter / remove poverty from the entire country, we need to target specifically 4 regions on the highest priority basis. Such as :

      1, Beside Gwadar, other key districts of Southern Balochistan, such as Turbat Panjgur Washuk Kharan & Awaran………. These districts are the potential recruitment areas of BLA BRA, just because of extreme poverty, extreme LOW HDI

      2. FATA areas which was the ground of recruitment of banned outfits due to illiteracy unawareness and poverty.

      3. Particular districts of interior Sindh, such as Tharparkar, Umarkot, Thatta & Sujawal ……

      4. Particular districts of Southern Punjab / Seraiki belt. Such as DG Khan, Rajanpur, Muzaffargarh, Bhakkar, Lodhran & Bhawalpur.

  3. Refinery at gwadar will allow Ishita to cut it’s import oil bill by half because we will be importing crude oil instead of refined oil so the cost of pipe line will pay for it self in a few years and this project will provide thousands of jobs only in the refinery but also maintenance on the pipe line. Bravo

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