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Saudi Arabia gives a blow to China in Pakistan, will not build oil refinery in Gwadar

Saudi Arabia has dealt a big blow to both China and Pakistan with its single decision. It has decided to shift the proposed $10 billion oil refinery from Gwadar to Karachi. Gwadar is considered the most important part of China’s ambitious Belt and Road project. However, Saudi’s move has fueled speculation of it losing its identity as a mega-investment hub.

Pakistan’s Prime Minister’s Special Assistant on Energy and Petroleum Tabish Gauhar told the media that Saudi Arabia would not build its own refinery in Gwadar but with a petrochemical complex somewhere near Karachi. He had told that in the coming five years, a second refinery with a capacity of two lakh barrels per day could be built in Pakistan. Saudi Arabia signed the agreement for this project in February 2019.

Wasn’t Gwadar a good idea?
The decision to shift the project to Karachi shows the lack of infrastructure in Gwadar. A Pakistani official told Nikkei Asia on condition of anonymity that the Gwadar refinery was not a good idea. “A good location for the Gwadar refinery would have been when a 600-km pipeline would connect it with Karachi, the country’s oil supply hub,” he says.

Currently, there is an oil pipeline connecting Karachi to northern Pakistan, not to the east. Without a pipeline, it would have been very expensive to carry oil from Gwadar to the center of the country. He says that with the current pace of development, the infrastructure issues of Gwadar do not seem to be resolved for the next 15 years.

‘The result of Pakistan-Russia closeness?’
The official also indicated that Pakistan’s energy sector agreements with Russia could be the reason behind Saudi’s decision. In February 2019 itself, a delegation from Russia also promised to invest $ 14 billion in different energy projects. These have not been worked out, but after Pakistan, the option of Saudi is definitely open. According to the report, the Gwadar refinery was also not a good idea due to security reasons.

The shift of the refinery from Gwadar to Karachi also indicates that the CPEC (China-Pakistan Economic Corridor) or China’s BRI (Belt and Road Initiative) have failed to promote Gwadar as a mega-investment hub. Foreign direct investment in Gwadar will be limited and will remain from the Chinese side. Due to this development will also be limited here. This has also raised the question that in 6 years what work have been done by Pakistan and China to improve the infrastructure of Gwadar.

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