Mohsin Siddiqui (Chief Reporter) 

The Petroleum Division has recommended a six-month extension for signing the Pakistan Oil Refining Policy to facilitate the upgrading of existing or Brownfield refineries. Despite Prime Minister Shahbaz Sharif’s directive for a signing ceremony, a firm date has yet to be confirmed.

In its recent summary presented to the Cabinet Committee on Energy (CCoE), dated February 6, 2024, the Petroleum Division’s proposed amendments to the policy were approved. This decision was later endorsed by the Federal Cabinet on February 15, 2024.

Consequently, the revised “Pakistan Oil Refining Policy for Upgradation of Existing/Brownfield Refineries 2023” was officially notified for implementation by OGRA and refineries. The policy aims to modernize refineries to produce environmentally friendly Euro-V fuels and reduce Furnace Oil production.

To incentivize upgrades, the policy offers a 2.5% increment on High-Speed Diesel (HSD) and 10% on Motor Spirit (MS) for seven years. Refineries must execute Upgrade Agreements, open an Escrow Account with OGRA, and provide a Rs. 1 billion bank guarantee within 60 days of the policy’s notification.

Refineries failing to meet the deadline will face reduced deemed duty on HSD. While some refineries have expressed readiness to sign, PARCO and Cnergyico Pakistan Limited (CPL) require additional time. PARCO is updating its feasibility study, and CPL is negotiating a settlement agreement with the government.

Considering the circumstances, the Ministry of Energy has proposed a six-month extension for signing the Upgrade Agreements and associated deadlines. Notably, three refineries have consented to sign, while PARCO and CPL seek an extension. Delays in policy formulation have already cost the country approximately $4 billion, with planned investments totaling $6 billion once all refineries participate.