The Government of Pakistan is considering the integration of a $10 billion Saudi Aramco refinery project into the China Pakistan Economic Corridor (CPEC), according to sources within the Petroleum Division.
This development follows discussions between Pakistan and Saudi Arabia aimed at expanding their cooperation in the refining and petrochemicals sector.
In a meeting on December 22, 2023, Pakistan’s Deputy Ambassador in Beijing engaged with the leadership of Sinopec Engineering Group (SEG), including its President Zhang Xinming.
The discussions, as reported by Business Recorder, centered around Aramco’s proposal to involve Sinopec as both a technical and equity partner in the proposed Greenfield refinery and petrochemicals project. A series of diplomatic and business interactions have paved the way for this proposal.
Initially, an MoU was signed on February 17, 2019, between Pakistan and Saudi Arabia to explore investment opportunities.
This was followed by a confidentiality agreement signed in April 2019 between Pakistan State Oil (PSO) and Saudi Aramco, marking the beginning of a deeper engagement on this front.
However, the project faced setbacks due to the COVID-19 pandemic and Pakistan’s economic uncertainties, leading to a temporary waning of Saudi interest.
Despite these challenges, negotiations resumed, focusing on addressing Aramco’s demands, including a 7.5% deemed duty on diesel and gasoline for the project’s lifespan, and the engagement of Chinese contractors to mitigate execution and investment risks.
Responding to these demands, the Greenfield Refinery Policy 2023 was approved, offering incentives to foreign investors and aligning with Aramco’s revised focus towards a petrochemical complex, moving away from traditional fuel-based refineries.
This shift reflects Aramco’s broader strategy and its successful joint ventures with Sinopec in China and the Kingdom of Saudi Arabia (KSA).
