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#Geoeconomics: China, Saudi Arabia and Pakistan may join hands in $10 billion Pakistan refining and chemical integration project.

The project involves the construction of an integrated refinery with a processing capacity of more than 300,000 barrels per day (BPD). Saudi Arabia is also interested in acquiring the Lehkodik copper and gold mine in Pakistan



Pakistani Prime Minister Shahbaz Sharif is expected to pursue a $10 billion refinery integration project with China and Saudi Arabia during his trip to Beijing in June 2024, a senior official of Pakistan's Ministry of Energy has revealed.


During this period, the three sides are expected to sign a non-binding memorandum of understanding to move the project forward.

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As for the long-awaited integrated refining and chemical project, its size and capacity remain to be clarified. Officials from Pakistan's Ministry of Energy told the media that Saudi Aramco, Sinopec and the Pakistan National Petroleum Company (PNPC) intend to conduct a joint study on the project. Once the joint study is completed, the exact size and capacity of the project will be determined.


According to historical information, the project is expected to reach a capacity of more than 300,000 barrels per day (BPD) with a total investment of up to $10 billion.

The advancement of this mega project will undoubtedly reinvigorate the energy security and economic development of Pakistan and the region as a whole.


Regarding the division of roles among the three parties, Saudi Aramco acts as the initiator and main investor in the integrated refining and chemical project, and is responsible for promoting the project and preparing the related memorandum of understanding (MoU). Pakistan State Oil (PSO), in view of its internal financial situation, has provided a site for the project and is likely to make a limited investment, acting as coordinator and negotiating with Sinopec the details of cooperation.


Sinopec is interested in becoming the EPC for the project, handling the engineering, procurement, construction, and subsequent operation and maintenance of the project.


The three parties are working together to advance this important project.

Saudi Arabia: a flurry of activity


Saudi Arabia, as a possible initiator, signed an investment agreement with Pakistan containing the refinery project as early as 2019, when Crown Prince Salman visited the country. The Saudi side was very concerned about the actual profitability of the project, which directly determined its willingness to invest. However, after the investment agreement was signed in 2019, the Saudi side lacked the momentum to move forward with the project due to the collapse of international crude oil prices to record lows in 2020, the profitability of the refinery business has dropped significantly, and the Pakistani side is facing a shortage of funds, which has led to suspending the project's progress for a while.


According to the initial investment plan between the Saudis and Pakistanis, the initial investment in the project was $3 billion, of which Saudi Arabia was to pay $1.5 billion and Pakistan $1.5 billion. The remaining $7 billion was to be raised by Saudi Arabia through its own influence. At present, the refining and chemical integration project is under joint study. Saudi Aramco said it will wait for the results of the joint study before making the final investment decision. In addition, Saudi Aramco prefers to build petrochemical refineries rather than green refineries and proposes to award the EPC contract to Sinopec.


Saudi Arabia is also interested in acquiring the Lehkodik copper and gold mine in Pakistan.

Pakistan: actively pursue relations between China and Saudi Arabia


Pakistan has strong diplomatic relations with both Saudi Arabia and China. However, the country faced political turmoil and a sharp downturn in economic conditions in 2023, and the issue of loan defaults continues to receive international attention. Given a history of multiple balance of payments crises, Pakistan has often had to rely on countries such as Saudi Arabia and China for financial assistance and investment support.


Since current Pakistani Prime Minister Sharif took office in February this year, he has been actively planning a series of intensive diplomatic trips targeting China and Saudi Arabia.

In April 2024, incumbent Pakistani Prime Minister Sharif chose Riyadh for his first trip to the country since taking office, holding a private meeting with Saudi Crown Prince Salman. This was not only in keeping with the diplomatic tradition between the two countries, but it was also Sharif's initiative to visit a friendly country in the Gulf region to personally convey that Pakistan's internal political turmoil had subsided and that economic reforms would continue as a response to Saudi Arabia's earlier concerns.


The Saudis, for their part, may have urged Pakistan during the meeting to measure its commitment to political stability and economic reforms, suggesting it restore currency stability through an agreement with the International Monetary Fund (IMF).

It now appears that Pakistan has managed to reach a short-term agreement with the IMF and intends to begin negotiations for a longer-term program. In the meantime, the Saudis sent a delegation led by the Minister of Finance to Pakistan, where the two sides discussed investment and pledged to invest a total of $5 billion in various sectors, including agriculture, mining, and aviation.


China: long-term cooperation with Saudi Aramco


Sinopec has long provided Saudi Arabia with a full range of services for EPC projects, including drilling, well services, physical exploration, pipeline laying, and road and bridge construction. Prominent Saudi companies and organizations such as Saudi Aramco, the Saudi Water Authority (SWCC), and the Riyadh City Royal Commission (RC) have established strong long-term cooperation with Sinopec.


In February 2024, Sinopec was successfully selected for the EPC work for the third phase of Saudi Aramco's natural gas pipeline network project (MGS-3), which was recognized along with other competitors such as PetroChina and Shandong Dalian.


In January 2024, Sinopec's joint venture with a Spanish company won the EPC contract for Saudi Aramco's new natural gas liquefaction plant (NGL), with a total contract value of up to $3.3 billion.


In June 2023, Sinopec Nanjing Engineering successfully won the EPC contract for Saudi Aramco's Amiral P5AC project, with a total contract value of more than $700 million.


In June 2023, Sinopec Nanjing Engineering Company successfully won the EPC contract for Saudi Aramco's Amiral P5AC project, with a total contract value of more than $700 million.



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