Saudi Arabia urges Pakistan to engage Sinopec in $10bn green refinery project

To expedite the establishment of a $10 billion green refinery in Pakistan, the Kingdom of Saudi Arabia (KSA) has called upon Pakistani authorities to involve China's Sinopec. 

As per reports, the KSA has also expressed a desire for the engineering, procurement, and construction (EPC) contract to be awarded to China Sinopec. In line with this, Pakistan State Oil (PSO), nominated by the Government of Pakistan, is in communication with the Bank of China and Sinopec.

Sinopec has a track record of providing services to Saudi Arabia, including rig services, well servicing, geophysical exploration, pipeline construction, road and bridge projects, and other EPC endeavors.

Furthermore, the Executive Committee (EC) of the Special Investment Facilitation Council (SIFC) has directed the Petroleum Division to assess Sinopec's interest in investing in the green refinery alongside Saudi Aramco.

This directive was given during the EC's meetings held on October 23 and 24, 2023, at the Prime Minister's Office.

The EC also urged the Petroleum Division to identify other credible parties interested in the project and share updates with the Apex Council (AC) in their upcoming meeting.

In the context of the petroleum sector, the Executive Committee of SIFC has instructed relevant ministries, divisions, and authorities to assess the capacity, resource, and investment requirements for both greenfield and brownfield refinery projects to enhance refining capacity.

The Petroleum Division has also been tasked with identifying other credible parties interested in investing in the refinery sector.

The refinery, set to be located in Hub, Balochistan, is anticipated to produce 8 million tonnes of diesel and 6 million tonnes of gasoline annually, meeting stringent 5-euro specifications.

Notably, on July 27, 2023, the China Road and Bridge Corporation (CRBC) signed a memorandum of understanding (MoU) with the Pakistani government to construct the $10 billion Saudi-backed refinery based on the CPC-F model. Now, Pakistan aims to attract Sinopec's involvement at the request of the KSA.

The project is planned to have a 30:70 equity-loan ratio, with $3 billion in equity and $7 billion in loans. Pakistan and Saudi Aramco will each share 50 percent of the equity, amounting to $1.5 billion each.

Saudi Aramco will secure the remaining $7 billion in loans through international financial institutions. The CRBC will also arrange loans from Chinese banks under the engineering, procurement, and construction (EPC-F) model.

Of Pakistan's 50 percent equity share, PSO will hold 25-30 percent, while OGDCL, PPL, and GHPL will each have a 5 percent share. Notably, the Pak Arab Refinery Company (PARCO) did not sign the MoU.

Saudi Aramco has conducted a pre-feasibility study and marketing assessment and will proceed with a detailed feasibility study before launching the project. Front End Engineering Design (FEED) will also be completed.