Saudi Arabia to shift proposed $10 billion oil refinery and petrochemical complex from Gwadar to Karachi

It is pertinent to note that there is an oil pipeline from Karachi to the north but not to the west.

Gwadar.

Saudi Arabia has decided to shift a proposed $10 billion oil refinery and petrochemical complex from Gwadar to Karachi.

This was revealed by the Special Assistant to the Prime Minister on Power & Petroleum, Tabish Gauhar.

On the 2nd of June, Gauhar informed the media that Saudi Arabia would not establish the oil refinery at Gwadar.

Instead, the refinery will be constructed, along with a petrochemical complex, somewhere around Karachi.

It is pertinent to note that during the visit of the Crown Prince, Mohammad Bin Salman (MbS), to the South Asian country in February 2019, Saudi Arabia had inked several memoranda of understanding (MoUs) worth $20 billion in multiple sectors of the economy.

During the visit of the Saudi Crown Prince to Pakistan in February 2019, several MoUs worth $20 billion were signed. One of the MoUs was regarding a $10 billion Saudi investment in an oil refinery and petrochemical complex at Gwadar. (AP)

Out of this, the kingdom had intended to invest $10 billion in an oil refinery and petrochemical complex at Gwadar.

Loss for Gwadar

The recent shift from Gwadar to Karachi has some critics examining the infrastructural insufficiencies in Gwadar.

On the condition of anonymity, an official in the petroleum sector informed Nikkei Asia that a mega oil refinery in Gwadar was not achievable at this time.

“Gwadar can only be an attainable location of an oil refinery if a 600-km oil pipeline is constructed connecting it with Karachi, the hub of oil supply of the country,” the official said.

It is pertinent to note that there is an oil pipeline from Karachi to the north but not to the west.

“Without a pipeline, the transportation of processed oil from Gwadar via road in oil tankers to consumption hubs in the country will be extremely expensive,” the official said.

Similarly, Arif Rafiq, the President of Vizier Consulting, a New York-based legislative risk firm, informed Nikkei Asia that a Saudi-commissioned feasibility study on a refinery and petrochemicals complex in Gwadar recommended against it.

“Saudi interests have shifted closer to Karachi, which makes sense, given its closeness to regions of high demand and existing logistics networks,” he added.

Meanwhile, Rafiq added that this step is a loss for Gwadar, and “any progress in Gwadar in the upcoming decade or two will be sluggish and incremental” as a result.

Likewise, Aslam Bhootani, the National Assembly member representing Gwadar, said the move is a disadvantage not only for Gwadar but for all of Balochistan.

He said he would press the Petroleum Ministry to request the Saudis to review their decision.

What are your views on this? Share with us in the comments below.

  • “It is pertinent to note that there is an oil pipeline from Karachi to the north but not to the east.”

    Gwadar is west of Karachi not east.


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