Guangdong Electrical Design Institute from China has signed an agreement to build an oil refinery in the northwestern city of Dera Ismail Khan in Pakistan’s Khyber Pakhtunkhwa (KPK) province, according to Pakistan media reports.

Guangdong Electrical is a subsidiary of China Southern Power Grid Company. The refinery will have the capacity to refine 100,000 barrels of oil per day. It is being built for Falcon Oil, a Pakistani company which currently operates six refineries, producing a wide range of finished products. But it relies almost entirely on imported crude oil, while the new refinery will also feature local crude being produced from wells in KPK.

The strategic objective of setting up a refinery at Dera Ismail Khan is to reduce the amount of refined product imports in line with Pakistan Government policy, and to assist the country supply chain management program of petroleum products.

These extended networks will help meet the anticipated growth in demand along the China Pakistan Economic Corridor (CPEC), which is expected to be an economic game changer for the region. The CPEC will link Pakistan’s Gwadar port to China's Xinjiang province.