Aramco to assess Pakistan’s deep conversion refinery benefits

An Aramco worker walks past an oil tank at the Saudi Aramco oil refinery and oil terminal in Saudi Arabia.  Reuters/File
An Aramco worker walks past an oil tank at the Saudi Aramco oil refinery and oil terminal in Saudi Arabia. Reuters/File
  • “Pakistan officials are in touch with KSA counterparts,” says the official.
  • Prior to the agreement, both countries must sign a charter of commitments.
  • The project with a capacity to refine 350,000-450,000 barrels per day will be set up in the hub.

Islamabad: Saudi Arabia’s oil conglomerate, Aramco, is currently examining Pakistan’s proposal for the deep conversion refinery, which follows the engineering, procurement, construction (EPC)-F mode and will be constructed by the Gulf country. , a senior energy official said. the ministry told news.

The official said that before any agreement can be formalised, the two countries will have to sign a charter of commitments. This would be followed by various contracts covering financing, host government and security agreements.

“Pakistan officials are in touch with their KSA counterparts for a comprehensive agreement,” the official said.

The pre-feasibility study and marketing assessment have been completed by Saudi Oil Group, and the next phase involves conducting Front End Engineering Design (FEED) to assess project feasibility before undertaking the major undertaking.

China is also expected to assist in mitigating the risks of Saudi investment.

Pakistan has already approved and shared the Green Refinery Policy with the capitals of major economies. The refining policy is very attractive, with the inducement of 7.5 per cent deemed duty for 25 years and tax exemption for 20 years.

The project will be set up in Hub, Balochistan, with a capacity to refine 350,000-450,000 barrels per day.

The $10.5 billion refinery will be built under a 70:30 debt-equity ratio, and Saudi Aramco will share 30% equity. Pakistan State Oil On the basis of 50%. “KSA can provide 100% equity. And 70% cost of the project is to be arranged through loans,” said the official.

If a petrochemical complex is added to the project, the cost of the refinery could increase to $10.5 to $14 billion because of the need to add at least one new (greenfield) 300–400k bpd deep conversion refinery and petrochemical complex along with the associated. Import terminal and pipeline infrastructure to meet future demand.

“No new hydro-skimming refinery will be allowed to be set up in the country and only a brand new deep conversion refinery will be allowed,” the official said.

Aramco is a serious player, due to which various financial institutions will easily come up with loan offers. Saudi Arabia wants China to be a part of this project and build it and Chinese banks will also be ready to give loans for this project. EPC mode may become EPC-F (Financing) mode.

Saudi Aramco and PSO will finance $3 billion of equity ($1.5 billion each) and the balance will be arranged through debt under the EPC mode. However, it is likely that Saudi Arabia will provide the full 30 percent equity of the $3 billion.

The new green refinery will be permitted to sell its products to any marketing company including its own associates in the marketing and distribution sector in the country, as per the minimum Euro 5 specification notified by the Petroleum Division from time to time.

Refineries will be permitted to export surplus (relative to domestic demand) petroleum products, subject to approval from OGRA. However, refineries can export products with specifications that do not have domestic demand by intimating OGRA and MEPD.

Presently, five organizations are functioning Oil Refining Sectors in Pakistan: Pak-Arab Refinery Limited (PARCO), Attock Refinery Limited, National Refinery Limited, Pakistan Refinery Limited and Cnergyico Pk Limited.

All refineries except PARCO are based on older, hydroskimming technology. PARCO is a light-conversion refinery, and that too is now over 20 years old.

The product slate of all existing local refineries generally includes naphtha, motor gasoline (petrol), high-speed diesel (HSD), furnace oil (FO), kerosene, jet fuel (JP-1 and JP-8), high-octane Are included. Blending Components (HOBC), Liquefied Petroleum Gas (LPG) and Light Diesel Oil (LDO).

pakistan oil The refining capacity is approximately 450,000 bpd, which is equivalent to 20 million tonnes per annum. Against a refining capacity of 20 million tonnes, the actual capacity utilization is around 11 million tonnes. The main reason for this is the declining FO demand in the country as a result of change in the energy mix in the power sector.

It should be noted that in essence, the production slate for the refineries is fixed. ie, they cannot produce only MS or HSD; All products are produced simultaneously.

Thus, as the demand for FO decreases, refineries have to reduce their overall production and struggle to maintain their throughput at optimum levels. According to the forecast of an international consultant, the demand for MS and HSD in Pakistan is expected to reach 33 million tonnes per annum (MTPA) by 2035.

Pakistan is importing significant quantities of petrochemicals worth over $2 billion annually, as there is no primary petrochemical production facility in Pakistan. Petrochemical consumption includes thermoplastics and thermosetting resins.

In the thermoplastics category, the bulk consumption is of polyethylene (PE) and polypropylene (PP).

Currently, Pakistan’s petrochemical industry is limited to the production of polyvinyl chloride (PVC), polystyrene (PS), synthetic fibers, (i.e., polyester), and purified terephthalic acid (PTA) and polyethylene terephthalate PET resins.

There is no production of any basic petrochemical i.e. Ethylene, Propylene etc. in the country.

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