ISLAMABAD:
With increasing trade and business activities at Gwadar, Pakistan has again pushed Saudi Arabia to set up an oil refinery worth $10 billion in the port city.
Activity at Gwadar Port has jumped up to 30% in recent months in the backdrop of US-Israel-Iran war as more and more ships arrive at Pakistani ports for transshipment. Gwadar has emerged as a transit hub and a further rise in activities is expected in the coming months.
Pakistan’s government is currently looking towards Saudi Arabia, which earlier explored the potential of establishing an oil refinery and strategic fuel reserves at Gwadar Port.
Officials from both countries were scheduled to engage in meetings on Thursday but those were cancelled.
The minister for maritime affairs and other officials of the ministry recently offered several projects to the kingdom, particularly the development of an oil refinery at Gwadar, during an online meeting with Pakistan-Saudi Arabia Joint Business Council Chairman Mansour bin Mohammed Al Saud and other participants.
The business council chairman was set to lead a Saudi team for further discussions with Pakistani authorities on Thursday but the meeting was postponed.
The Pakistani side has also sought Saudi investment in liquefied petroleum gas (LPG) and liquefied natural gas (LNG) terminals at Karachi Port. The maritime minister has got vacated 100 acres of land at the port, which he is seeking to offer to industries. Saudi Arabia has also shown interest in setting up a petrochemical complex there.
The Special Investment Facilitation Council (SIFC) is taking the lead to secure investment from Saudi Arabia. Crown Prince Mohammed bin Salman visited Islamabad in 2019, when he announced potential investments of $20 billion. Of the total, Riyadh was to inject $10 billion into setting up an oil refinery.
However, the investment did not arrive. Now, Pakistan and Saudi Arabia have signed a defence pact and following the US-Iran war, the two countries have inched closer. Therefore, Pakistan feels it is the right time Saudi Arabia makes the stalled investment.
Saudi investors have two key observations about the investment environment in Pakistan. First is the inconsistency of policies and the second is bureaucratic hurdles that are impeding capital inflows.
Pakistan has already approved an oil refinery policy to pave the way for Saudi investment while the SIFC is striving to dismantle bureaucratic hurdles. According to sources, upcoming discussions between the two countries are expected to unlock the investment potential.
Pakistan has also offered Saudi Arabia to acquire 15% shares in the $100 billion Reko Diq copper and gold mining project in Balochistan. Additionally, an Energy City has been planned for Gwadar Port, where the government has offered oil-producing nations to build strategic reserves.
Saudi Arabia is a major oil producer that could develop strategic reserves in Pakistan. Oil-producing countries could not only maintain the reserves but they could also export to other countries, officials said, adding, however, that the first right of use would remain with Pakistan’s government.
Petroleum Minister Ali Pervaiz Malik has held meetings with ambassadors of different countries to encourage them to set up strategic oil reserves. According to him, Pakistan will also offer tax holiday to the investors building oil deposits in the country.
Pakistan is the only country in the region that has no strategic reserves. It is just keeping commercial reserves, which are held by oil marketing companies and oil refineries.
