KSA shows interest in Pakistan’s $6bn coastal refinery

Special KSA shows interest in Pakistan’s $6bn coastal refinery
This file photo shows a general view of the old port in Gwadar, Pakistan, Nov. 13, 2016. (REUTERS)
Updated 19 November 2018

KSA shows interest in Pakistan’s $6bn coastal refinery

KSA shows interest in Pakistan’s $6bn coastal refinery
  • With Saudi investment, refining capacity could be scaled up from 250,000 to 400,000 bpd
  • UAE to finalize investment decision about $6 billion by end of June 2019, Al Kaabi

KARACHI: Saudi Arabia has shown investment interest in Pakistan’s largest coastal refinery, a multibillion-dollar project being set up at Khalifa Point, near Hub, Balochistan, officials have confirmed.
“Saudis have shown an interest in coming into the project, if we require more equity for an even larger, scaled-up project — from 250,000 barrels to 400,000,” Sher Afghan Khan, spokesman for the Ministry of Energy (petroleum division) and board member of Pak-Arab Refinery Limited (PARCO), told Arab News on Sunday.
PARCO is implementing the PARCO Coastal Refinery project at Khalifa Point, a state-of-the-art refinery with a capacity of 250,000 barrels per day (over 11 million tons per annum).
The Pakistan government has allocated 1,811 acres of land for the establishment of PARCO Coastal Refinery, which is expected to be finalized by the end of June 2019. The project is expected to complete by the end of 2023.
“The project is proceeding as per schedule with no delays. The land is available and the boundary wall is under process,” Khan said.
PARCO is a 60:40 joint venture between the Government of Pakistan and the emirate of Abu Dhabi, through Mubadala Investment Company.
It is a fully integrated energy business engaged in oil refining, oil pipeline operations, and marketing of petroleum products.
“The UAE is very interested in investing in the coastal refinery project and also clearly committed to funding it,” said Khan.
Last week, Musabbeh Al-Kaabi, chief executive of the petroleum and petrochemicals division of Mubadala Investment, said an investment decision on Pak-Arab Refinery, a project that could cost up to $6 billion, would be finalized by the end of 2019.
“We are working with our Pakistani counterparts to progress on the engineering studies. We’re expecting a FID (final investment decision) in the near future. We’re targeting the end of 2019. The base plan is 250,000 bpd of oil and we’re talking about $5.5 to $6 billion,” Al Kaabi was quoted as saying by local media.
The refinery project will be managed and operated by the wholly owned subsidiary PARCO Coastal Refinery Limited. When completed, the facilities will comprise a modern, deep conversion refinery with a capacity of 250,000 barrels per day, supported by associated marine loading facilities. It will be Pakistan’s largest refinery and serve the rapidly growing domestic markets for refined products.
If it materializes, the Saudi investment in coastal refinery will be another significant venture into Pakistan’s energy sector.
Earlier, during the first foreign visit of Prime Minister Imran Khan to Saudi Arabia, the host country agreed to invest in the most modern oil refinery in Pakistan’s deep-water Gwadar port.
In the Gwadar refinery, Pakistan State Oil, a state-owned utility, will partner with Saudi state oil giant Aramco. Aramco will conduct the feasibility study of the Gwadar oil refinery project, Abdul Razak Dawood, adviser for commerce, textile, industry and production, and investment of Pakistan, recently told Arab News.
Analysts believe that the KSA’s substantial investment would largely benefit Pakistan’s petroleum-refining sector, which needs more foreign investment in terms of funds and expertise.
“It is indeed a positive development for Pakistan because due to shortage of refining capacity Pakistan also relies on the import of refined petroleum products to meet domestic demand,” said Saad Hashmey, senior analyst at Topline Securities.
Pakistan’s petroleum products’ demand in the fiscal year 2017-18 was 26.13 million tons, while 11.73 million tons were locally refined. The demand for oil is anticipated to hit 27 million tons by the fiscal year 2019-20, according to the Oil Companies Advisory Council, an umbrella organization of oil refineries and marketing companies.
At present Pakistan meets its 85 percent requirements through imports in the shape of crude and refined petroleum products, while indigenous crude oil meets only 15 percent of the country’s total requirements. The indigenous and imported crude is refined by six major and two small oil refineries.