Five state-owned entities (SOEs) will today sign a memorandum of understanding (MoU) to finance their equity shares in Saudi Aramco’s $10-11 billion greenfield refinery project at Hub, Balochistan.
The deal will be signed by Oil and Gas Development Company Limited (OGDCL), Pakistan State Oil (PSO), Pak-Arab Refinery Limited (PARCO), Pakistan Petroleum Limited (PPL), and Government Holdings Private Limited (GHPL).
The MoU will be valid for three years and include regular meetings and a committee to assess progress. The project’s costs will be distributed proportionally among the equity partners mentioned above. They will also be responsible for project approvals, due diligence, and secrecy, and any third-party talks for project sponsorship will take place during the term of the MoU.
The coalition government had earlier expedited talks with Saudi Arabia to finalize the project, which is projected to strengthen Pakistan’s energy security and lower its import cost. It bears mentioning that Saudi Arabia is also open to China being a part of the project and building it, and Chinese banks are willing to give money for the project.
Pertinently, Pakistan has already adopted and communicated the Green Refinery Policy with big economies. The refining strategy offers a 7.5 percent deemed tariff for 25 years and a 20-year tax break. The project will be installed at Hub, Balochistan, with a capacity of 350,000-450,000 barrels per day.
The $10-$11 billion refinery will be developed with a loan-equity ratio of 70:30, with Saudi Aramco sharing 30 percent equity while other SOEs will take the rest of it.
The new green refinery would be permitted to sell its goods to any marketing firm in the country in accordance with the minimum Euro 5 specification issued by the Petroleum Division.
Subject to OGRA clearance, the refinery would be permitted to export surplus petroleum products while refineries may export products with specifications that do not have domestic demand.
