Aramco Backs Out of Refinery in Gwadar. Chinese Say Yes

Saudi Arabia’s Aramco is said to have shelved a plan of setting up an oil refinery (worth $10 billion) in the oil city of Gwadar Port in Balochistan, a news report recently said.

Background discussion with a Pakistani analyst indicates the report is true. “Don’t know the actual reasons”, said a senior official on condition of anonymity.

“Pakistan unfortunately has lost capacity to undertake projects of such magnitude”, the official adds.

Is it due to geopolitics? Seems so.

“In addition to any geopolitics, Pakistan is capable of frustrating any sensible man, organization or country,” the senior official remarked. “This is one of the reasons I give a lot of credit to the Chinese for sticking with us”.

What are other possible reasons?

“The choice of location is one of them”, says an observer. The demand center for petroleum products is said to be north of Gwadar. Shipping petroleum products (refined oil) through tankers or pipeline may not be feasible, says the observer. “Ideally a refinery could be near Mahmoodgoth or Muzaffargarh or little north of it”, he added.

Pakistan had asked Saudi Arabia to invest in the refinery “for strategic reasons –in order to operationalize the CPEC, and to turn Gwadar into a regional hub not only for trade but also for oil, gas, pipelines, etc. for supply from and to Central Asia and to China.Thirdly, it would open up Balochistan province for economic growth”, says the observer.

From Saudi standpoint, the observer says, an oil refinery using less than 500,000 barrels a day, did not make economic sense.

Pakistan imports only 90,000 barrels of crude oil a day from Aramco. And “Saudis wanted their crude to be used if they go with the refinery”, an energy professional says.

It would mean importing more than 90,000 barrels from Aramco –as much as 500,000 bpd, the professional tells DesPardes.

According to the observer, “when we asked Saudis to invest in the refinery in Gwadar, we did not have a feasibility report to present them (even for anywhere in Pakistan, let alone Gwadar)”.

“So Aramco hired Americans to prepare one”, he adds. “And they asked for queries. That’s where the problems started”.

This is essentially due to dysfunctionalism, some observers point out to, weighing in the senior official’s remark that, “Pakistan is capable of frustrating any sensible man, organization or country”.

The Saudis were not keen (therefore), the observer tells DesPardes.

“The Chinese were ready to join hands, thanks to our diplomatic efforts”, says the observer. “They wanted to do a favor to Pakistan…so they said Yes”.