A memorandum of understanding (MoU) was signed by four state-owned petroleum companies in Pakistan to facilitate a $10 billion Saudi investment in a new oil refinery at Gwadar, Balochistan. With a production capacity of 300,000 barrels per day, this refinery will be the first in more than ten years and the biggest in the country.
The government is apparently in the final phases of negotiations with Saudi conglomerate Aramco to carry out the greenfield refinery project at the significant Gwadar Port, and it wants to finalize the first paperwork before its tenure expires in two weeks.
The MoU was signed by the state-owned Oil and Gas Development Company Ltd (OGDCL), Pakistan State Oil (PSO), Pakistan Petroleum Ltd (PPL), and Government Holdings Private Ltd (GHPL) to join efforts and provide reassurance to the Saudi enterprise considering a substantial investment in Pakistan. The four SOEs would participate in the initiative through equity investment.
The project calls for the construction of an integrated refinery-petrochemical complex with a crude oil processing capacity of at least 300,000 bpd and a petrochemical unit. The integrated complex will include a variety of components such as marine infrastructure, a petrochemical complex, crude oil and refinery storage facilities, pipeline connectivity, and so on.
Despite playing a crucial role in the expansion of the economy, only two new refinery projects have materialized in Pakistan in the past ten years, according to the Petroleum Division. The actual capacity usage is only about 11 million tonnes compared to the 20 million tonnes of refining capacity.
To facilitate the Saudi investment in refining, the government has recently passed a new policy under which a new deep conversion oil refinery of a minimum of 300,000 bpd achieving financial close of the project within 5 years shall be eligible for a customs duty of 7.5% for 25 years on petrol and diesel of all grades produced effective from the date of commissioning of the refinery.
The said refinery shall also enjoy a 20-year tax holiday and would also be entitled to exemption from levy of customs duties, surcharges, withholding tax, general sales tax, any other ad valorem tax, or any other levies and duties on import of any equipment to be installed, or material to be used in the refinery projects without any precondition for obtaining certification by the Engineering Development Board.
The project agreements between the project company, the main sponsors, investors, and the relevant government would record and protect these financial incentives and other facilitations, and they would also be protected by the Special Economic Zones Act.
Minister for State Musadiq Malik, who witnessed the MOU signing ceremony, said the Saudi oil firm showed a willingness to inject the entire equity into the multibillion-dollar refinery project, leading the Pakistani government to decide on a joint venture with key SOEs.
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