Saudi Arabia and Pakistan to a sign multi-billion dollar oil refinery MoU


  • An agreement between Saudi Arabia and Pakistan for establishing an oil refinery
  • Saudi Crown will visit Pakistan soon
  • Another $1billion cash deposit is expected
  • Biggest investment project in the history of Pakistan
  • The project will benefit Pakistan in many ways
Saudi Arabia and Pakistan to a sign multi-billion dollar oil refinery MoU

Pakistan and Saudi Arabia are ready to sign a MoU for the construction of a multi-billion dollar Saudi Aramco oil refinery in Gwadar.

Recently a cabinet member confirmed that the Saudi Crown Prince Mohammad bin Salman will come to Pakistan in the first week of February.

Cash deposits from Saudi Arabia:

At an interest rate of 3.18%, Pakistan has already received $2billion in cash deposit from Saudi Arabia.

Further, the third tranche of $1billion is expected in the first week of February. The Saudi oil facility will start rolling out this month with an average $274 million per month.

Pakistan to sign investment deals with Saudi Arabia:

In the month of February, Pakistan is expected to sign various investment deals including the construction of a mega oil refinery.

Biggest investment project of Saudi Arabia – Information Minister confirms:

The confirmation on the oil refinery project was given by the Information Minister Fawad Chaudhry, he said:

“The Saudi Aramco oil refinery project is the biggest investment project of Saudi Arabia in Pakistan.”

Saudi delegation visited Gwadar:

The Minister of State and Chairman of Pakistan Board of Investment (BoI), Haroon Sharif told:

As a part of the finalization process of the MoU for Aramco oil refinery, a 15-member delegation of Saudi Arabia visited Gwadar from Karachi.

Finalizing the agreement:

The Minister further said:

“We’ve finalized the MoU for the construction of Aramco oil refinery, overall directions have been agreed upon and the agreement will be signed at an appropriate time.”

Around $15 billion investment from Saudi Arabia in the next 3 years is expected. Also, the inflow of investment for the oil refinery in Pakistan is estimated to be between $6 billion to $10 billion.

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Here is what the Finance Minister said on this:

Last month, the Finance Minister Asad Umar had said:

“Incoming investment package from Saudi Arabia will be the biggest foreign investment in the history of Pakistan.”

How will it benefit Pakistan?

The Minister for Planning and Development MakhdoomKhusroBakhtiar said that the development of an oil refinery is more important for Pakistan than Saudi Arabia.

It is because it would significantly reduce Islamabad’s oil import bill estimated for the current year at $18billon.

The refinery will also ensure that Pakistan’s requirement for financial support from the International Monetary Fund is minimized.

Saudi Arabia and Pakistan to a sign multi-billion dollar oil refinery MoU

A wish list of investment projects:

Pakistan and Saudi Arabia have shared a wish list of around eight to nine items for Saudi investment. Three to four of those items would materialize over the next few months.

The details of the agreement have been finalized with Saudi Arabia at the technical level. However, the remaining issues will be fixed out by the second week of January.

Once the draft is agreed at the technical level, it will be signed by the ministers of both countries.

How the deal will work:

Pakistan based refineries will place orders with Saudi Aramco, Pakistan has a long-term contract with Aramco for supplying 110,000 barrels per day (bpd).

The Pak Arab Refinery Ltd (Parco) and National Refinery Limited (NRL) will place orders for import with Aramco.

The Development Fund of Saudi Arabia will pay in dollars to Aramco. However, these refineries will deposit an equal amount in Pak rupee with State Bank (SBP) here in Pakistan.

The SBP will then begin repayments to the Saudi Development Fund 12 months later, with monthly payments.

For example, the payment of January 2019 will be made in January 2020. This arrangement will be in place for a period of three years, with oil imports worth $9billion.

Saudi Arabia had earlier offered a similar special package to Pakistan soon after the nuclear tests of 1998 and the country faced international sanctions.

Between 1998 and 2002, Pakistan received $3.5billion (Rs190billion at the exchange rate at that time) worth of oil from Saudi Arabia on deferred payment.

Final thoughts:

Saudi Arabia has also shown serious commitment to make investments in other areas of the energy sector.

Both countries have strong bilateral friendly relation and that will scale new heights under the present government.

The proposed 500,000 barrels per day refinery is likely to be completed with an investment of about $8-9billion.


Source: Dawn

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