Saudi Arabia offers cheaper gas to steel producer Al Tuwairqi

After the Pakistani government refused to supply gas at a preferential price to Tuwairqi Steel in Pakistan, the Saudi Arabian government is seeking to provide the holding with cheap gas. Moreover, this price is lower than the steel manufacturer demanded from the Pakistani government

Tuwairqi Steel Mills Limited is a joint venture between Saudi Arabia and South Korea. They planned to create a large metallurgical complex in Pakistan with a capacity of 1.28 million tons per year. The first phase-I of the direct reduction iron ore (DRI) plant with an investment of US $ 340 million has been completed. However, the DRI facility has been closed for the past several months due to a dispute over gas supplies. At the same time, a capital injection of $ 850 to $ 900 million for the construction of Phases II and III is possible subject to the commercial success of the DRI plant.

The management of Tuwairqi Steel asked for a subsidy for gas supplies for five years for the efficient operation of the plant. However, Pakistan's finance department and the ministry of oil and natural resources opposed the subsidies, saying the government was not legally obligated to supply gas at a preferential rate. Even last year, speaking at a press conference, the chairman of Al Tuwairqi Holding warned of the imminent end of the plant's operations if the government does not provide gas at a preferential rate.

In an attempt to reach a settlement, the company even offered a 15 percent stake in the steel plant to the government at no cost in return for the gas supply. Later, the company offered to give 17 percent of the shares to the government, but the issue remained unresolved.