Pakistan eyes $12b deals with Saudi Arabia

Published: February 12, 2019
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Prime Minister Imran Khan with Saudi King Salman. PHOTO: SAUDI GOVT WEBSITE

Prime Minister Imran Khan with Saudi King Salman. PHOTO: SAUDI GOVT WEBSITE

ISLAMABAD: After decades of dependence on Saudi grants, Pakistan is poised to sign billions of dollars of investment deals with the kingdom during an upcoming visit of Crown Prince Mohammad Bin Salman, including a multibillion dollar oil refinery in Gwadar.

“Pakistan and Saudi Arabia will sign three memoranda of understanding for investment in oil, renewable energy and mineral sectors during the royal visit,” Prime Minister’s Adviser on Commerce and Investment Razak Dawood told a select group of journalists on Monday.

“It is very likely that an agreement for $3 billion oil facility on deferred payments will also be signed during the visit,” said Dawood, who was very upbeat about keen interest being shown by Saudi investors in Pakistan.

Pakistan will also ask Saudi Arabia to take part in the privatisation of over $2 billion worth of LNG-fired two power plants, although the kingdom had earlier showed interest in buying those units only under a government-to-government deal.

Dawood did not put an exact investment figure by Saudi Arabia, as the precise size of the investment will be determined once a feasibility study of the oil refinery is ready.

The adviser estimated minimum $10 billion to $12 billion Saudi investment in Pakistan in the medium term.

“It will take about 15 months to 18 months to complete the feasibility study,” said Dawood.

He said the cost of the oil refinery will be in the range of $5 billion to $6 billion but if the Saudis decide to build a petrochemical complex the cost would increase close to $10 billion.

A strong Saudi delegation comprising 600 to 700 delegates — including 40 private investors — would visit Pakistan, at the weekend, said Board of Investment Chairman Haroon Sharif.

Prince Mohammed is expected to arrive in Pakistan this week, although an exact date of his arrival has not yet been officially disclosed. It is expected the crown prince would arrive on Saturday or Sunday.

His security team, comprising 170 personnel, has already arrived in Pakistan and is visiting various places in Islamabad.

Two five-star hotels and couple of three-star hotels have been booked for the delegates. In addition, media reports suggested that the PM’s House that had earlier been converted into a university will be used to host the royal guests.

The investment deals with Saudi Arabia will mark a partial departure from Pakistan’s decades-old policy of begging from Saudi Arabia in difficult economic times.

In 1998, after the nuclear explosions, Saudi Arabia had given free oil facility to Pakistan that continued for many years.

In 2014, the then PML-N government had secured $1.5 billion “gift” from Saudi Arabia. However, the government did not issue official statement regarding the purpose of the grant.

This time also, Saudi Arabia has agreed to give $3 billion annual oil facility on deferred payments, which can be rolled over for three years period.

In addition, Pakistan has also obtained $3 billion Saudi loan at 3.18% interest rate to shore up official foreign currency reserves.

At the heart of the investment is the multibillion dollar refinery and oil complex in the strategic Gwadar Port on the Arabian Sea, the ultimate destination for the massive multi-billion dollar China-Pakistan Economic Corridor.

But Razak Dawood said Saudi Arabia never discussed with Pakistan whether the oil refinery will be part of CPEC. He, nonetheless, said that Saudis “will export refined oil to other destinations to which Pakistan has no objection”.

The facility will have 250,000 to 300,000 barrel per day refining facility. “We want that the refinery should be internationally competitive and is viable without the government support,” said Dawood.

To a question, the adviser said that Pakistan will also extend tax incentive package, similar to one given for the UAE oil refinery project.

Former prime minister Shahid Khaqan Abbasi had approved $1.6 billion worth of incentives for the UAE-based Abu Dhabi Petroleum Investment Company to encourage it to establish an oil refinery along the coast in Hub.

The incentives were given on a planned investment of $5 billion in the refinery — a project of the Pak Arab Refinery Company (Parco).

Dawood said that the UAE has given front-end engineering design contract for the construction of the refinery.

The BOI chairman said that during the crown prince visit a government-to-government deal for $2 billion investment in renewable energy projects will also be signed.

“The third memorandum of understanding will be for minerals developments,” said the BOI chairman.

He said the BOI has already taken the consent of the four provinces for signing the umbrella deal in the minerals sector.

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