The proposed $10 billion deep conversion refinery project in Pakistan is facing delays due to concerns raised by Saudi Aramco, the potential investor.
Pakistani officials have expressed confusion over Aramco's hesitation, especially considering the incentives offered by Pakistan, including a 7.5 percent deemed duty for 25 years and a 20-year tax holiday.
Recent discussions with Aramco representatives have indicated that the company's reluctance stems from a shift in its business strategy. Aramco, having gained more autonomy from the Saudi government, is reportedly less inclined to invest in the refinery sector due to perceived reduced profitability.
Aramco has hinted at reducing its equity in the project from $1.5 billion to $900 million, a move that would further complicate the project's financing. Additionally, Aramco is no longer willing to lead the project and has asked the Pakistani government to arrange the necessary loans.
The possibility of a change in Pakistan's government after the upcoming elections could alter the project's trajectory. If Nawaz Sharif's PML-N party forms the government, the project may receive renewed attention.
Aramco's growing interest in petrochemical complexes rather than refineries has also created challenges for Pakistani authorities. The project was originally envisioned as an EPC-F (engineering, procurement, and construction-finance) model, with a 30:70 equity loan ratio.
Pakistan's Shehbaz Sharif government signed an MoU with China Road and Bridge Corporation (CRBC) in July 2023, expecting CRBC to participate as a contractor and arrange loans from Chinese banks.
Four MoUs were also signed on the Pakistani side, allocating 25 percent of the $1.5 billion equity to PSO and 5 percent each to OGDCL, PPL, and GHPL.
Saudi Arabia subsequently requested Pakistan to involve China's Sinopec in the project and award the EPC contract to the same company. Negotiations are ongoing between Pakistan State Oil and the Bank of China and China Sinopec.
