Pakistan’s oil refineries have asked the federal government to immediately finalize and sign the Upgrade and Escrow Agreements under the revised Brownfield Refineries Upgradation Policy, warning that continued delays are increasing financial losses and threatening billions of dollars in planned investments.
The issue matters because the refinery modernization programme is expected to improve fuel quality, reduce Pakistan’s dependence on imported petroleum products, and strengthen the country’s energy security.
The call comes after the Cabinet Committee on Energy (CCoE) approved amendments to the policy aimed at reviving the long-delayed refinery upgrade programme. However, refiners argue that implementation remains stalled because the required agreements have yet to be executed.
Key Details
- Pakistan’s oil refineries have requested the government to immediately sign the Upgrade and Escrow Agreements.
- Attock Refinery Limited (ARL) says it fulfilled all policy requirements before the October 22, 2024, deadline.
- Refineries face a retrospective cut in deemed duty protection from 7.5% to 5% on High-Speed Diesel (HSD) if agreements are not signed.
- The refinery sector says delays are due to the government’s side, not the companies.
- The Brownfield Refineries Upgradation Policy aims to attract nearly $6 billion in refinery investments.
Refineries Say They Met All Requirements
In a letter to the Petroleum Division, Attock Refinery Limited (ARL) welcomed the government’s recent policy amendments but objected to the decision to reduce deemed duty protection for refineries that had not formally signed the agreements by October 22, 2024.
ARL stated that it, along with National Refinery Limited (NRL), completed all required obligations before the deadline. These included obtaining board approvals, initialing draft agreements with the Oil and Gas Regulatory Authority (OGRA), and arranging the required bank guarantees.
According to the refinery, the agreements could not be formally executed because of delays on the government’s side rather than any failure by the companies.
The company has now urged the Petroleum Division to circulate the revised drafts of the Upgrade and Escrow Agreements so they can be signed without further delay.
Uncertainty Over Supervising Authority
Another issue slowing implementation is uncertainty over which government institution will oversee the agreements.
Under the amended policy approved by the Cabinet Committee on Energy, OGRA is responsible for signing and monitoring the agreements.
However, officials are reportedly considering shifting that responsibility to the Petroleum Division. Industry sources say such a move would require another amendment to the policy, potentially creating additional delays.
Financial Impact on Refineries
Under the revised framework, refineries that did not sign the agreements before the deadline face a reduction in deemed duty protection on High-Speed Diesel (HSD) from 7.5% to 5%.
Refiners argue that because the agreements remain unsigned due to administrative delays, they continue to suffer an avoidable financial penalty despite having fulfilled their obligations months earlier.
An ARL representative stated:
“The agreements could not be executed due to delays beyond the control of the refineries.”
Background
Pakistan introduced the Brownfield Refineries Upgradation Policy in 2023 to modernize aging refining infrastructure and encourage approximately $6 billion in private investment.
The policy aims to:
- Upgrade refineries to produce Euro-V standard fuels.
- Increase production of high-value petroleum products.
- Reduce Pakistan’s reliance on imported refined fuels.
- Improve environmental standards and refinery efficiency.
However, the programme remained largely inactive for nearly two years because of disagreements over legal protections, implementation agreements, and tax treatment.
What This Means
The refinery upgrade programme is considered one of Pakistan’s most significant energy-sector investment initiatives.
If implementation continues to face delays, planned investments could be postponed further, slowing refinery modernization and limiting Pakistan’s ability to reduce fuel imports and improve domestic fuel quality.
The government’s latest policy amendments are intended to resolve these issues, but industry participants say execution is now the biggest challenge.
What’s Next?
The Petroleum Division is expected to issue revised drafts of the Upgrade and Escrow Agreements following the recent policy amendments.
Officials must also decide whether OGRA will retain responsibility for executing the agreements or whether those powers will be transferred to the Petroleum Division through another policy amendment.
Industry stakeholders are hoping the agreements will be finalized quickly so refinery upgrade projects can finally move forward.
Frequently Asked Questions (FAQs)
What is the Brownfield Refineries Upgradation Policy?
It is a government initiative launched in 2023 to modernize Pakistan’s existing oil refineries through nearly $6 billion in planned investments.
Why are refineries requesting immediate agreements?
Refineries say they completed all required conditions before the deadline, but government delays prevented formal signing, resulting in financial losses.
What happens if the agreements remain delayed?
Continued delays could postpone refinery upgrades, reduce investment, and extend the reduced deemed duty protection available to refineries.
