Pakistan renews push for Saudi refinery at Gwadar

ISLAMABAD: Pakistan has again urged Saudi Arabia to move ahead with a $10 billion oil refinery project at Gwadar as activity at the deep-sea port rises and Islamabad seeks to attract fresh investment into energy and maritime infrastructure.

Traffic at Gwadar Port has increased by up to 30% in recent months in the backdrop of the US-Israel-Iran war, with more vessels arriving at Pakistani ports for transshipment. The port is now being seen by Pakistani authorities as a growing transit hub, with expectations of further activity in the months ahead.

The renewed push came during a recent online meeting in which the minister for maritime affairs and ministry officials presented a number of projects to Pakistan-Saudi Arabia Joint Business Council Chairman Mansour bin Mohammed Al Saud and other participants. A key proposal was the development of an oil refinery at Gwadar. Mansour bin Mohammed Al Saud was due to lead a Saudi delegation for more talks with Pakistani authorities on Thursday, but the meeting was postponed. Officials from both countries had been scheduled to hold discussions the same day, though those meetings were also cancelled.

Broader investment proposals

Pakistan has also invited Saudi investment in liquefied petroleum gas (LPG) and liquefied natural gas (LNG) terminals at Karachi Port. The maritime minister has had 100 acres of land vacated at the port and is seeking to offer that land for industrial use. Saudi Arabia has also expressed interest in establishing a petrochemical complex there.

The Special Investment Facilitation Council is leading efforts to secure Saudi investment. During Crown Prince Mohammed bin Salman’s visit to Islamabad in 2019, Saudi Arabia announced potential investments of $20 billion, including $10 billion for an oil refinery. However, that investment did not materialise.

Pakistan now believes the timing may be more favourable for reviving the stalled plan, particularly after Pakistan and Saudi Arabia signed a defence pact and as relations between the two countries have drawn closer following the US-Iran war.

Investor concerns and strategic reserves

Saudi investors have raised two main concerns about investing in Pakistan: policy inconsistency and bureaucratic obstacles affecting capital inflows. Pakistan has already approved an oil refinery policy to support the proposed Saudi investment, while the SIFC is working to remove bureaucratic impediments.

Upcoming discussions between the two sides are expected to help unlock investment opportunities. Pakistan has also offered Saudi Arabia the option to acquire a 15% stake in the $100 billion Reko Diq copper and gold mining project in Balochistan.

An Energy City is also planned for Gwadar Port, where the government has offered oil-producing countries the opportunity to build strategic reserves. Saudi Arabia, as a major oil producer, could establish such reserves in Pakistan. Officials said oil-producing countries would be able to maintain those reserves and export to other destinations, although Pakistan’s government would retain the first right of use.

Petroleum Minister Ali Pervaiz Malik has held meetings with ambassadors of various countries to encourage investment in strategic oil reserves. According to him, Pakistan will also offer a tax holiday to investors building oil storage facilities in the country. Pakistan is the only country in the region without strategic petroleum reserves and currently relies only on commercial stocks held by oil marketing companies and refineries.