Riyadh asks Islamabad to approach China’s Sinopec for $10 billion green refinery project

Pumpjacks are seen during sunset at the Daqing oil field in China's Heilongjiang province on August 22, 2019.  - Reuters
Pumpjacks are seen during sunset at the Daqing oil field in China’s Heilongjiang province on August 22, 2019. – Reuters
  • Riyadh wants the EPC contract to be given to Sinopec.
  • Petroleum Division asked to assess Sinopec’s investment interest.
  • SIFC asked the division to facilitate Chinese firms if they are interested.

ISLAMABAD: Saudi Arabia has asked Islamabad to approach China’s Sinopec and make it a part of its $10 billion green refinery to be set up in Pakistan. news on Sunday.

Sources said, “We have announced and notified the new green refinery policy with incentives of 7.5% deemed duty and 20 years of tax holiday for 25 years as per the desire of Saudi Arabia, but some incentives are required for the required pace of progress. is required.”

Riyadh also wants the engineering, procurement and construction (EPC) contract to be awarded to Sinopec. As per the request, Pakistan State Oil, designated by the Pakistani government, is in touch with Bank of China and Sinopec.

Sinopec is also providing services to Saudi Arabia (rigs, well-service, geophysical exploration), pipelines, roads and bridges and other EPC projects. Sinopec has been serving Aramco, SWCC, RC and many Saudi local cities, and has earned a good reputation among customers as well as the Saudi people.

Meanwhile, the Special Investment Facility Council (SIFC) has directed the Petroleum Division to assess the investment interest by Sinopec in a green refinery with Saudi Aramco. If Chinese firms are interested in investing, the Council has also tasked the division to facilitate the same by expediting the necessary approvals.

Further, Petroleum Division has also been asked to identify other interested credible parties for investment in the refinery and update on the special issue of paramount importance in the next SIFC Apex Committee meeting.

Once the mega refinery is established at Hub, Balochistan, it will produce 8 million tonnes of diesel and 6 million tonnes of gasoline with 5-euro specifications per year.

On July 27 this year, China Road and Bridge Corporation (CRBC) signed a memorandum of understanding (MoU) with the government to build the mega Saudi-backed refinery based on the engineering, procurement and construction (EPC-F) model. , But now the government is trying to bring Sinopec in Saudi interest.

The refinery is to be constructed on a 30:70 equity-debt ratio. Equity will be $3 billion and debt will be $7 billion. Saudi Aramco will share 50% equity of $1.5 billion in the project and the same 50% equity will be shared by Pakistan.

The remaining $7 billion loan will be arranged by Saudi Aramco through international financial institutions (IFIs), the official said. Additionally, under the MoU signed on July 27, CRBC will also arrange loans from Chinese banks under the EPC-F model. Of the remaining 50% from the Pakistan side, PSO will hold 25%-30%, and OGDCL, PPL and GHPL will hold 5% respectively. However, Pak Arab Refinery Company (PARCO) did not sign the MoU.

Saudi Aramco has already conducted pre-feasibility studies and market assessment and will now test the detailed feasibility of the project before launch. Front End Engineering Design (FEED) will also be completed during the process.

The new green refinery will be allowed 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 from time to time by the Petroleum Division.

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

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