Islamabad, 16 February 2024(WAI): The Government of Pakistan is actively considering integrating a $10 billion Saudi Aramco refinery project into the China-Pakistan Economic Corridor (CPEC), as disclosed by sources in the Petroleum Division.
Pakistani officials and representatives from Sinopec Engineering Group (SEG) in Beijing unveiled Aramco’s proposal to involve Sinopec as a technical and equity partner in the refinery project. However, Aramco redirected its focus to petrochemical complexes due to market dynamics, sparking deliberations about Sinopec’s potential equity investment.
Sources from the Ministry of Foreign Affairs revealed that Pakistan’s Deputy Ambassador in Beijing met with Sinopec Engineering Group’s President, Zhang Xinming, on December 22, 2023. The discussions covered Aramco’s proposal to involve Sinopec in the Greenfield refinery and petrochemicals project. SEG was briefed on the Greenfield Refinery policy incentives endorsed by the federal cabinet in April 2023, to which SEG expressed willingness to proceed.
Subsequently, the Petroleum Division urged the Power Division to include the Saudi Aramco Refinery Project in the agenda of the upcoming meeting of the Joint Working Group on Energy.
Historical Agreements and Challenges
The Memorandum of Understanding (MoU) for exploring investment opportunities in the refining and petrochemical sector was signed between the Governments of Pakistan and Saudi Arabia on February 17, 2019. A joint ministerial delegation visited Saudi Arabia in April 2019, culminating in a confidentiality agreement between PSO and Saudi Aramco on April 23, 2019.
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Impact of COVID-19 and New Considerations
However, Saudi interest in the project waned due to the repercussions of Covid-19 and economic uncertainties in Pakistan. Following multiple discussions between PSO and Aramco, the latter expressed its inability to invest in a fuel-based refinery in Pakistan, opting instead for petrochemical complexes.
While there is demand for petrochemical products in the Pakistani market, more is needed for an economically viable plant. Aramco is now contemplating Sinopec as an equity investor, considering their collaborative ventures in China and Saudi Arabia.
Political Analyst | M.Phil. Scholar
