Oil refining sector sees $1 billion investment boost

Cnergyico Pk takes first step as new govt policy prompts investments in industry

ISLAMABAD:

Cnergyico Pk Limited, the country’s largest refiner, is eyeing more than $1 billion in investment following the introduction of a new government policy aimed at stimulating the industry.

Following its investment, Cnergyico plans to enhance its production of Euro-V compliant motor gasoline and high-speed diesel, simultaneously decreasing its furnace oil output in response to its declining and unpredictable demand.

Pakistan has faced several economic challenges in recent times, including political instability, soaring inflation, a weakening currency, and declining foreign exchange reserves. These factors have eroded investor confidence, making local and foreign investors hesitant to allocate capital for major projects.

In a move to counteract these trends, the government recently announced the Brownfield Oil Refinery Policy. This initiative, designed to stimulate investment in existing projects, follows the earlier introduction of the Greenfield Refinery Policy, which sought to draw foreign investment into the sector.

While foreign investors haven’t yet committed to building new facilities, the Brownfield policy has ignited interest among the five leading domestic refiners: Cnergyico, Attock Refinery Limited (ARL), Pakistan Refinery Limited (PRL), National Refinery Limited (NRL), and Pak Arab Refinery Limited (PARCO).

Cnergyico has recently announced its plans to invest over $1 billion in the modernisation and expansion of its oil refining operations. The company’s oil refining complex, capable of processing up to 156,000 barrels of crude oil daily, constitutes approximately 37% of Pakistan’s total oil refining capacity.

Talking to The Express Tribune, a Cnergyico spokesperson hailed the new policy, stating, “This will spearhead the revival of Pakistan’s oil refining industry, leading to a significant increase in production of environmentally friendly fuels, reduced reliance on imported fuels, substantial foreign exchange savings, job creation, and a boost in overall business activity.”

Read PRL launches $1.7b refinery upgrade project

Cnergyico is actively engaged in discussions with the government to address the delays in petroleum levy payments, a situation exacerbated by the challenging economic climate that has impacted the entire oil refining sector, alongside delays in receivables from government-controlled entities. The company’s outstanding receivables from these entities currently surpass the amount owed to the government for the petroleum levy.

“We are fully committed to resolving this matter at the earliest in accordance with the approved oil refining policy,” said the spokesperson.

In addition to Cnergyico, PRL also seeks to upgrade its plants and double its processing capacity to 100,000 barrels per day by spending $1.7 billion. PRL, a subsidiary of PSO, expects to complete the project by the end of 2028. Overall, the five oil refineries across Pakistan are poised to invest between $5 billion and $6 billion in modernising their facilities.

These upgrades could potentially double Pakistan’s petrol production and increase diesel output by 47%, while furnace oil might see a 78% drop. Such advancements could lead Pakistan to diesel self-sufficiency, curtailing the costly need for imports that burden the country’s finances.

Published in The Express Tribune, February 28^th, 2024.

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