Fueling Growth: Pakistan's Ambitious Gwadar Oil Refinery Project and Saudi Support
In a strategic move, Pakistan is eyeing the construction of an oil refinery near the Gwadar port, aiming to slash its petroleum product imports. This development comes as Pakistan seeks financial support from Saudi Arabia, not only to bolster its economy but also to avoid seeking another bailout from the International Monetary Fund, a move prompted by a growing current accounts deficit.
P.c. Pakistan Today
Prime Minister Imran Khan's administration is determined to transform the Chinese-funded Gwadar port into what they envision as an "oil city." This ambitious endeavor seeks to reduce Pakistan's reliance on imported refined fuel, as explained by Khusro Bakhtyar, the Minister for Planning, Development, and Reforms.
While media reports suggest that Saudi Arabia is contemplating investing in this multi-billion-dollar refinery project, Bakhtyar did not disclose the estimated cost or the extent of Saudi investment. Last month, Pakistan invited Saudi Arabia to partake in projects linked to the China-funded Belt and Road infrastructure corridor, with the Gwadar port being a cornerstone of approximately $60 billion in Pakistani projects.
The concept of an "oil city" in Gwadar is gaining traction, with Bakhtyar outlining how importing cheaper crude oil for refining, rather than costly finished products, could reduce Pakistan's staggering $16 billion petroleum import bill by half. Khan's first foreign trip as prime minister was to Riyadh, although there has been no official confirmation of Saudi Arabia extending an economic lifeline to Pakistan.
The nation is grappling with dwindling foreign reserves, which currently stand at around $9 billion—barely sufficient to cover external debt obligations until year-end. Furthermore, the Pakistani rupee has depreciated by over 20% since December.
Reports in local media suggest that Islamabad is exploring the possibility of a deferred-payments arrangement for Saudi oil, a measure that could bolster foreign reserves. Additionally, there is speculation about a bridge loan of approximately $2 billion. However, both governments have refrained from commenting on any formal requests or agreements.