Will the announced Saudi oil refinery for Gwadar be built in Hub now?
The oil refinery announced by Saudi Arabia for the Pakistani coastal city of Gwadar is now planned to be relocated to Hub, a coastal town in Balochistan near Karachi, instead of the city now known as C-Pack's 'gateway'. Is being considered.
More than one government and political official involved in the project has confirmed that the oil refinery is now being considered for construction in Hub due to a number of issues related to the project announced by the Saudi Crown Prince.
It should be noted that during the visit of Crown Prince Muhammad bin Salman of Saudi Arabia to Pakistan in February 2019, investment agreements worth 20 billion were signed by Saudi Arabia in Pakistan. An agreement was also reached to set up a refinery in Gwadar city.
The 8-10 billion refinery deal is almost three years old, but no progress has been made since then.
News about the construction of the refinery at Gwadar, the gateway to the China-Pakistan Economic Corridor, has been circulating for some time now. The refinery will be built in the industrial town hub of Balochistan.
Although no significant progress has been made on the Saudi-built refinery in Hub, according to people associated with the oil and gas sector in Pakistan, the Saudi refinery project is a "political project" and for some time. Saudi Arabia has not shown much interest in the refinery due to the recent cold snap in bilateral relations.
The government agency in the oil sector has also pointed out that construction is now under consideration in Hub. Although government officials are still reluctant to take a stand on the issue, they have said that the industrial city of Balochistan, Hub, was also under consideration from the beginning.
What is the plan of Saudi refinery?
Ahead of Saudi Crown Prince Mohammed bin Salman's visit to Pakistan, Saudi Energy Minister Khalid al-Faleh announced that Saudi Arabia would build a large refinery in the Pakistani coastal city of Gwadar. The announcement was further enhanced when a memorandum of understanding was signed on the occasion of Muhammad bin Salman's visit to Pakistan in February 2019 to set up the refinery at a cost of 8-10 billion in Gwadar.
A senior official of a government agency associated with the oil sector told that the refinery is an agreement of Deep Conversion Refinery under which petrol, diesel as well as chemicals i.e. lubricants are produced in the refinery.
He said that in fact this is not a refinery but a project of petrochemical complex. According to him, the existing refineries operating in Pakistan produce furnace oil along with petrol and diesel and do not produce lubricants. However, the Saudi refinery is a petrochemical project capable of refining three to four million barrels of crude oil, which, if started today, would take seven to eight years to complete.
Was the plan to set up a refinery in Gwadar feasible?
Saudi Arabia's refinery project in Gwadar has been described as "unworkable" by those in the oil and gas sector.
A senior official of the government agency said that the project is not feasible because after the establishment of the refinery in Gwadar, how will the products produced in it be delivered?
He said that in the refinery operating in Karachi, diesel produced from crude oil is transported to Punjab through White Pipeline and similarly some portion of petrol is also sent from this pipeline from Punjab and North.Gwadar is far from Karachi and a new pipeline would have to be laid for the manufacture and delivery of manufactured goods at the refinery there, estimated at 1.5 billion and unlikely by Saudi Arabia. He should invest heavily in this pipeline.
He said this came to light when the feasibility report for the establishment of the refinery was prepared.
Talking to about the viability of the project, Tahir Abbas, Head of Research of Arif Habib Limited, said that for any investment, the first thing to look at is whether its future outlook is positive.
He said,''After the establishment of the refinery, how will the products produced in it be consumed when the government in the country is working to promote electric vehicles and hybrid vehicles.''
He said that the implementation of any project depends on the extent to which it will be effective in the future. However, in the case of the Saudi refinery, it can be said that Is working on the policy of then how the products made in this refinery will be used.
Has Hub been under consideration for the refinery project from the beginning?
An investigation into the setting up of the refinery in Hub, Balochistan, instead of Gwadar, revealed that the agreement to set up the refinery included only Gwadar and Hub was not part of its original plan.
A government official said a feasibility report was being worked out for Hub. However, he said that Hub was not included in the original agreement and now due to Saudi Arabia's lack of interest in Gwadar, Hub has been selected for the job.
In this regard, the state oil marketing company Pakistan State Oil (PSO) which was in touch with the Saudi company Aramco for setting up this refinery, was contacted by KMD Syed Taha and he confirmed that Hub also Under consideration in this regard.
He said the matter was being looked into at the government level and a suitable location for setting up the refinery was being worked out. He said he could confirm that Hub was also under consideration.
A government official said Hub was now the area where the Saudi refinery would be located.
"There are two or three reasons why this is a good place for Saudi Arabia," he said. On the one hand, due to its proximity to Karachi, the products made in the refinery here can be easily shipped across the country and before that, a refinery Baiko was also operating in Hub.
"The second reason is that oil-producing countries are more interested in selling their oil, even if they have less profit in the refinery." If a refinery is set up in Hub, Saudi oil could be easily used and then shipped across the country, for which they would have to invest an additional 1.5 billion in the form of a refinery in Gwadar. Would be needed so that oil products from there could be shipped across the country.
The government official said that the refinery in Pakistan will now be built by Saudi Arabia in Hub but no progress has been made on this yet as earlier this year the Saudi company Aramco had made a feasibility study for the refinery in Hub. The report was also prepared but no progress has been made since then due to a slight bitterness in the relations between Saudi Arabia and Pakistan which is now gone and after that Pakistan has to pay three billion dollars. Deposits and late payments have also been facilitated, but no progress has been made on the refinery project.