Gwadar's Oil Refinery Revolution: ESGL's $4.5 Billion Project
In a remarkable development, East Sea Group Limited (ESGL), a Chinese firm, has initiated a plan to construct a $4.5 billion oil refinery in Gwadar, Pakistan, boasting an annual oil processing capacity of 8 million tons, as reported by Gwadar Pro on Monday.
As per an official document obtained by Gwadar Pro, the project will be executed in two phases. The first phase will possess an annual refining capacity of 5 million tons. ESGL will deploy a fleet of at least six crude oil transshipment vessels, totaling 2 million tons, at Gwadar Port in Pakistan every month. This will not only support their oil source business but also offer oil transshipment services to major Middle East oil-producing nations.
P.c. Umar
During a Think Tank Session at the PCICCI secretariat, East Sea Group CEO Fang Yulong, who also holds the position of Senior Vice President at the Pakistan-China Joint Chamber of Commerce and Industry (PCJCCI), unveiled the ambitious "Gwadar Petroleum Storage and Transportation Trading Centre" project.
The inception of the oil refinery project can be traced back to a meeting between Zhang Baozhong, Chairman of China Overseas Ports Holding Company (COPHC), and Pakistan's Prime Minister Shahbaz Sharif in June 2022. Prime Minister Shahbaz promptly formed a committee to facilitate the refinery's establishment, and all stakeholders expressed their unwavering support in subsequent meetings chaired by the Secretary of the Petroleum Division.
Sources within the Ministry of Energy (Petroleum Division) disclosed that the refinery would significantly augment Pakistan's storage capacity, allowing for longer reserves and foreign exchange savings. This multi-billion dollar venture is poised to invigorate investments in the petrochemical sector in Gwadar and seeks the assistance of government departments to formulate a comprehensive policy framework for its realization.
The government of Pakistan is poised to greenlight this mega project, and relevant institutions are gearing up to scrutinize the detailed business plan and feasibility study. The Oil and Gas Regulatory Authority (OGRA) will handle the necessary licensing under the OGRA Ordinance 2022 for planning and construction.
Nagman Abdul, President of the Gwadar Chamber of Commerce and Industry, hailed the oil refinery project as a "catalyst for a new era of development." He anticipates job creation, expanded business opportunities, and a reduction in Pakistan's oil expenditure.
This move to launch a Chinese oil refinery has reignited interest from other foreign investors who had previously halted investments in the oil refinery sector. Back in January 2019, Saudi Arabia announced plans to establish a $10 billion oil refinery in Gwadar, but the project was later reconsidered for a different location in Pakistan.
Recent developments have seen Saudi Arabia renew its engagement in Gwadar, with high-level meetings signaling increased cooperation. Additionally, the UAE has expressed interest in establishing a state-of-the-art refinery with a daily output of 500,000 barrels in Hub, Balochistan, in collaboration with Pak-Arab Refinery Limited (PARCO).
Currently, Pakistan's oil refining sector comprises five local players, including Pak-Arab Refinery Limited (PARCO), Attock Refinery Limited (ARL), National Refinery Limited (NRL), Pakistan Refinery Limited (PRL), and Cnergyico Pk Limited (CPL). These refineries primarily utilize hydroskimming processes, except for PARCO, which operates as a mild-conversion refinery. Pakistan's total oil refining capacity stands at approximately 450,000 barrels per day, equivalent to 20 million tons annually. Local refineries contribute about 60 percent of the country's diesel, 30 percent of motor gasoline, and 100 percent of jet fuel for defense, while the rest is imported due to the absence of a primary petrochemical production facility in Pakistan, resulting in annual petrochemical imports exceeding USD 2 billion.