Gwadar oil facility has potential to capture China, Central Asian markets

February 28, 2019: A state-of-the-art oil refinery and petrochemical complex, being established at Gwadar deep seaport city, has tremendous potential to capture markets in China and Central Asian landlocked states where fuel supply takes weeks to reach through other routes.

Under the China Pakistan Economic Corridor (CPEC), the fuel transportation to China via Pakistan would take just seven days as import through western China takes almost 40 days, an official source privy to the Petroleum sector developments told.

He said the mega oil facility was being constructed with around US $11 billion Saudi investment at the Gwadar deep seaport, an ultimate destination of the CPEC, would also help refine and store imported oil for onward transportation to China and develop fuel supply chain for the landlocked Central Asian states.

Besides, the official said the facility, having capacity to refine 200,000 to 300,000 barrels per day (bpd) oil, would help bring down the country’s oil import bill by US $ 1.2 billion annually.

Pakistan’s average annual oil consumption is around 26 million tons (MT), out of which 13.5 MT was met through local production of eight existing oil refineries. “While, 50 percent crude oil is imported to meet the energy needs.”

Answering a question, he said soon after singing the Memorandum of Understanding (MoU) for the refinery and petrochemical complex, Pakistan and Saudi Arabia agreed to establish a Joint Working Group (JWG) to ensure timely and smooth execution of the multi billion dollars project.

The official said the JWG would hold regular interaction to exchange information needed for carrying out feasibility studies of the project on a fast track.

Saudi Arabia, he said, was keen to set up the facilities at the earliest, which was reflected by four visits of Saudi technical teams and Energy Minister to Pakistan to inspect the project site and discuss other modalities, prior to signing of the MoU.

Replying to another question, the official said the government was making all-out efforts to upgrade existing oil refineries and establish new deep conversion facilities to achieve self-sufficiency in this sector.

For the purpose, he said, the government had recently banned import of furnace oil and announced unprecedented incentives package for setting up new deep conversion oil facilities, advising the existing oil refineries to enter into commercial agreements with power producers for utilization of their capacity for furnace oil storage and modernization of their facilities.

The official said an unprecedented incentives package was in place for setting up new deep conservation oil refineries, under which interested parties were exempted from all duties, taxes, surcharges and levies on import besides a 20-year income tax holiday.

“The exemption will be applicable on all machinery, vehicles, plants and equipment, other materials and consumables for setting up, operation, maintenance and repair of a refinery,” he said.

The package, the official said, would also be applicable on existing facilities where refining capacity was expanded by installing deep conversion units with capacity of at least 100,000 barrels per day (bpd) oil.

(APP)