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Aramco signs pact to set up $10bn refinery in Pakistan

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The price of Brent crude has risen 30 percent since May, and traders expect it to hit $100

Saudi Aramco has signed a memorandum of understanding with four Pakistani state-owned enterprises to set up a $10 billion oil refinery, the largest in the country.

The Pakistani government is in the advanced stages of negotiations with Aramco to execute the greenfield refinery project at the Gwadar Port. It aims to complete the initial paperwork before its tenure ends in two weeks, Dawn newspaper reported.

Pakistan’s minister for state Musadiq Malik said Aramco was willing to inject the entire equity into the refinery project, leading the government to decide on a joint venture with key state oil firms.

The four companies – Oil and Gas Development Company, Pakistan State Oil, Pakistan Petroleum and Government Holdings Private – will put equity participation into the project. No financial details of the deal were given.

The project will have an integrated refinery petrochemical complex with a crude oil processing capacity of a minimum 300,000 barrels per day.

Pakistan’s government recently passed a new policy under which a new deep conversion oil refinery will be eligible for a customs duty of 7.5 percent on petrol and diesel for 25 years.

It will get a 20-year tax holiday and exemptions from the levy of customs duties, surcharges, withholding tax and general sales tax.

Saudi Arabia in January said it could increase its investments in the cash-strapped Pakistan economy, state-owned SPA news agency reported. Crown Prince Mohammed bin Salman has directed a study to increase such investments to $10 billion, from the previous $1 billion announced in August.

Pakistan’s prime minister Shehbaz Sharif has already sought to forge closer economic ties with Gulf states to secure bigger investments.