Saudi Arabia, Pakistan ‘to sign deals worth up to $20 billion’

Pakistan army trucks park outside a presidential palace as security is beefed up in Islamabad ahead of the visit of Crown Prince Mohammed bin Salman. (AP Photo/B.K. Bangash)
Updated 17 February 2019
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Saudi Arabia, Pakistan ‘to sign deals worth up to $20 billion’

  • More than 30 public and private companies are poised to invest in Pakistan, including Saudi Aramco, SABIC and ACWA Power
  • The sectors targeted for Saudi investment include oil refining, petrochemical, mining, construction, power generation, agriculture and glass

KARACHI: Saudi Arabia is expected to announce investments in Pakistan worth between $15 billion and $20 billion during Crown Prince Mohammed bin Salman’s official visit, according to the head of Pakistan’s Board of Investment.

The Kingdom and the UAE in recent months have offered Pakistan more than $30 billion in loans and investments to tackle a soaring current-account deficit. The Saudi crown prince is due to sign off on his country’s deals, including one for a $10 billion oil refinery in Pakistan’s Gwadar Port.

“We are expecting Saudi investment in the range of $15 billion to $20 billion based on the interest investors have expressed so far,” said Haroon Sharif, minister of state and chairman of the Board of Investment.

Sharif previously said that Pakistan expected investments worth about $15 billion from Saudi Arabia over the next three years, and about $40 billion from Saudi Arabia, the UAE and China combined in the next three to five years.

Mian Mehmood, the Pakistani head of the Pakistan-Saudi Arabia Joint Chamber of Commerce and Industry, said recently that in addition to the oil refinery project, a further $10 billion is expected to be invested in sectors other than oil and gas, bringing the total to $20 billion.

“About 25 to 30 agreements are expected to be finalized during the visit of the crown prince,” said Mehmood who recently led a business delegation to the Kingdom to explore bilateral investment and cooperation opportunities.

More than 30 public and private companies are poised to invest in Pakistan, including Saudi Aramco, SABIC and ACWA Power, he added.

The sectors targeted for Saudi investment include oil refining, petrochemical, mining, construction, power generation, agriculture and glass.

“Ten Saudi manufacturing companies working in construction and allied materials, and 10 companies interested in the food processing sector will come to sign agreements,” Mehmood said.

Speaking this month during a visit to Gwadar to inspect the site of the $10 billion oil refinery, Saudi Energy Minister Khalid Al-Falih said: “Saudi Arabia wants to make Pakistan’s economic development stable through establishing an oil refinery and partnership with Pakistan in the China-Pakistan Economic Corridor.”

Work on the refinery is expected to begin within 18 months.

“Once the project starts production, the country would be able to save about $2 billion in foreign exchange on costly imports,” said Samiullah Tariq, the head of research at investment firm Arif Habib Limited.


Saudi energy minister recommends driving down oil inventories, says supply plentiful

Updated 55 min 55 sec ago
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Saudi energy minister recommends driving down oil inventories, says supply plentiful

  • Oil supplies were sufficient and stockpiles were still rising despite massive output drops from Iran and Venezuela
  • Producer nations discussed how to stabilise a volatile oil market amid rising US-Iran tensions in the Gulf, which threaten to disrupt global supply

JEDDAH: Saudi Arabia’s Energy Minister Khalid Al-Falih said on Sunday he recommended “gently” driving oil inventories down at a time of plentiful global supplies and that OPEC would not make hasty decisions about output ahead of a June meeting.
“Overall, the market is in a delicate situation,” Falih told reporters before a ministerial panel meeting of top OPEC and non-OPEC oil producers, including Saudi Arabia and Russia.
While there is concern about supply disruptions, inventories are rising and the market should see a “comfortable supply situation in the weeks and months to come,” he said.
The Organization of the Petroleum Exporting Countries, of which Saudi Arabia is de facto leader, would have more data at its next meeting in late June to help it reach the best decision on output, Falih said.
“It is critical that we don’t make hasty decisions – given the conflicting data, the complexity involved, and the evolving situation,” he said, describing the outlook as “quite foggy” due in part to a trade dispute between the United States and China.
“But I want to assure you that our group has always done the right thing in the interests of both consumers and producers; and we will continue to do so,” he added.
OPEC, Russia and other non-OPEC producers, an alliance known as OPEC+, agreed to reduce output by 1.2 million barrels per day (bpd) from Jan. 1 for six months, a deal designed to stop inventories building up and weakening prices.
Russian Energy Minister Alexander Novak told reporters that different options were available for the output deal, including a rise in production in the second half of the year.
The energy minister of the United Arab Emirates, Suhail Al-Mazrouei, said oil producers were capable of filling any gap in the oil market and that relaxing supply cuts was not “the right decision.”
Mazrouei said the UAE did not want to see a rise in inventories that could lead to a price collapse and that OPEC would act wisely to maintain sustainable market balance.
“As UAE we see that the job is not done yet, there is still a period of time to look at the supply and demand and we don’t see any need to alter the agreement in the meantime,” he said.
US crude inventories rose unexpectedly last week to their highest since September 2017, while gasoline stockpiles decreased more than forecast, data from the government’s Energy Information Administration showed on Wednesday.
DELICATE BALANCE
Saudi Arabia sees no need to boost production quickly now, with oil at around $70 a barrel, as it fears a price crash and a build-up in inventories, OPEC sources said, adding that Russia wants to increase supply after June.
The United States, not a member of OPEC+ but a close ally of Riyadh, wants the group to boost output to bring oil prices down.
Falih has to find a delicate balance between keeping the oil market well supplied and prices high enough for Riyadh’s budget needs, while pleasing Moscow to ensure Russia remains in the OPEC+ pact, and being responsive to the concerns of the United States and the rest of OPEC+, the sources said earlier.
Sunday’s meeting of the ministerial panel, known as the JMMC, comes amid concerns of a tight market. Iran’s oil exports are likely to drop further in May and shipments from Venezuela could fall again in coming weeks due to US sanctions.
Oil contamination also forced Russia to halt flows along the Druzhba pipeline — a key conduit for crude into Eastern Europe and Germany — in April. The suspension, as yet of unclear duration, left refiners scrambling to find supplies.
Russia’s Novak told reporters that oil supplies to Poland via the pipeline would start on Monday.
OPEC’s agreed share of the cuts is 800,000 bpd, but its actual reduction is far larger due to the production losses in Iran and Venezuela. Both are under US sanctions and exempt from the voluntary reductions under the OPEC-led deal.
REGIONAL TENSIONS
Oil prices edged lower on Friday due to demand fears amid a standoff in Sino-US trade talks, but both benchmarks ended the week higher on rising concerns over disruptions in Middle East shipments due to US-Iran political tensions.
Tensions between Saudi Arabia and Iran are running high after last week’s attacks on two Saudi oil tankers off the UAE coast and another on Saudi oil facilities inside the Kingdom.
Riyadh accused Tehran of ordering the drone strikes on oil pumping stations, for which Yemen’s Iran-aligned Houthi militia claimed responsibility. 
Saudi Arabia’s minister of state for foreign affairs said on Sunday that the Kingdom wants to avert war in the region but stands ready to respond with “all strength” following the attacks.
“Although it has not affected our supplies, such acts of terrorism are deplorable,” Falih said. “They threaten uninterrupted supplies of energy to the world and put a global economy that is already facing headwinds at further risk.”
The attacks come as the United States and Iran spar over Washington’s tightening of sanctions aimed at cutting Iranian oil exports to zero, and an increased US military presence in the Gulf over perceived Iranian threats to US interests.