Saudi Arabia’s Aramco has agreed in principle to invest in a new oil refinery in Pakistan’s Chinese-funded, deepwater port of Gwadar, the Pakistani petroleum minister said on Thursday.
But a Saudi delegation visit ended with no economic lifeline for the South Asian nation’s looming foreign currency crisis.
Petroleum Minister Ghulam Sarwar Khan said talks had not sought deferred oil payments, contradicting an earlier statement by the finance minister.
Pakistan may need to approach the International Monetary Fund (IMF) for its second bailout in five years, though the government of new Prime Minister Imran Khan is seeking alternatives.
In the Gwadar refinery agreement, state-owned Pakistan State Oil will partner with Aramco, the Saudi state oil giant, Petroleum Minister Khan said.
Details of the refinery’s costs and capacity are to be finalised after a Memorandum of Understanding approved by Pakistan’s cabinet on Thursday is finalised, he added.
Gwadar, in the southwestern province of Baluchistan, is the crown jewel of China’s $60 billion investment in Belt and Road Initiative (BRI) projects in Pakistan.
Last month, Pakistan invited Saudi Arabia to invest in projects related to BRI’s China Pakistan Economic Corridor (CPEC).
The visiting Saudi delegation, led by energy adviser Ahmad Hamed Al-Ghamdi, visited Gwadar on Tuesday. “They showed an interest to immediately invest in the refinery,” said Khan, the petroleum minister.
“We sat down and held initial discussions with them and it was principally decided by both sides that it will be a government-to-government agreement.”
Any refinery deal needs support from the Baluchistan provincial government, and there has been concern that neighboring Iran might object to a project involving arch-rival Saudi Arabia on its doorstep.
However, on Thursday, Iranian Ambassador Mehdi Honer Doost raised no objections. “Iran will welcome Saudi and other Muslim countries investment in Baluchistan,” Doost told reporters.
Pakistan wants a new refinery to reduce its $16 billion bill for foreign petroleum by importing more cheaper crude oil to refine itself.
Rising oil prices have sent Pakistan’s current account deficit soaring. Foreign reserves have dropped to $9 billion, barely enough to cover external debt payments through the end of the year.