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Saudi Arabia, Russia investment: an impetus to Pakistan energy sector

Ardent interest of Saudi Arabia

Pakistan wants to develop Gwadar not only as an economic hub but also an oil city consisting of oil refineries and petrochemical complexes under CPEC. Gwadar’s port is being developed as part of the $64 billion China-Pakistan Economic Corridor, an ambitious plan to build energy and transport links connecting the western Chinese region of Xinjiang with the Arabian Sea via Pakistan, as part of Beijing’s broader Silk Belt and Road initiative.The 80,000-acres mega oil city at Gwadar will be used to transport oil from the Gulf region to China through the Gwadar port. This will reduce the distance to just seven days from Gwadar to the Chinese border instead of the current forty days. After the establishment of the oil city, Pakistan would be able to refine and store imported oil for onward transportation to China using the CPEC route, besides developing fuel supply chain for the landlocked Central Asian states.

Saudi Arabia has shown a keen interest in CPEC primarily to relate its economy with China and take steps in achieving its Vision 2030, which aims to diversify the economy with energy mega projects to reduce oil dependency. This would also utilize the unique location of Gwadar to become a global hub for vast economic activities. CPEC would provide the Saudis with an opportunity to participate even better in world trade traffic. Saudi Arabia will also be able to help China have a better crude oil supply. China is one of the largest oil consumers and highly dependent due to its trade and business activities. Therefore, Pakistan and Saudi Arabia both can benefit from the exclusive trade routes under CPEC.

Saudi Arabia has shown a keen interest in diverse fields, including mineral, fertilizer, wind and solar energy and has also offered assistance in establishing LNG reservoirs. Presently, Pakistan has reservoirs of petroleum products, but the country has no LNG storage facility. LNG comes straightway from the vessel, shifted to terminal and injected to transmission lines directly for onward supply to consumers. In order to meet the energy needs of the country, a liquefied natural gas (LNG) storage facility to maintain the strategic stock of the commodity needs to be established.

 

Russia’s willingness

Russia has shown willingness to invest $2 billion in the country’s water and power sector projects, including the Diamer Bhasha and Mohmand dams. A state-run entity Inter RAO Engineering is interested in inking a government-to-government (G2G) agreement between Russia and Pakistan. The same entity is involved in making a dam in Afghanistan on the Kabul River. Earlier, Pakistan and Russia had signed a governmental agreement to establish the north-south LNG pipeline and it also reached a memorandum of understanding (MoU) for an offshore gas pipeline project.Russia has also shown readiness to invest in water and power projects in the country. In a separate proposal, the entity has requested Pakistan to combine five small hydropower projects to implement in starting phase if the government isn’t willing to award big projects. Also, it has expressed interest in investing in water and power projects which include 7,100MW Bulji, 2,200MW Tangus, 800MW Mohmand Dam, 52MW Nauseri and 2,800MW Yulbo projects. It has shown willingness to provide technical support and financing for these projects, whose total projected cost is Rs318 billion.

The writer is a Karachi based freelance columnist and is a banker by profession. He could be reached on Twitter @ReluctantAhsan

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