Pakistan expects $6b investment as five refineries sign Brownfield upgradation deals

ISLAMABAD:

Pakistan’s five oil refineries are expected to sign agreements under the Brownfield Refinery Upgradation Policy early next month, with the deals expected to unlock around $6 billion in investment in the country’s refining sector.

According to a statement issued on Friday by the Petroleum Division, the managements of Pak Arab Refinery Limited (PARCO), Pakistan Refinery Limited (PRL), National Refinery Limited (NRL), Cnergyico and Attock Refinery Limited (ARL) had reaffirmed their readiness to sign the agreements.

“The managements of all five refineries reaffirmed their readiness to sign agreements under the Refinery Upgradation Policy, with the agreements expected to be signed early next month. The agreements are expected to unlock approximately $6 billion in investment in Pakistan’s refining sector,” the statement added.

Petroleum Minister Ali Pervaiz Malik held meetings with the managements of the five refineries to review progress towards implementing the Brownfield Refinery Upgradation Policy, their financial and operational performance, and measures to strengthen Pakistan’s energy security.

“The federal minister highlighted that refinery upgradation is essential for long-term sustainability of the country’s refining sector. He said the planned upgrades would enable refineries to produce Euro-V compliant fuel products in Pakistan,” the ministry added.

Producing the fuel domestically would help reduce reliance on imported petrol and diesel and could also help lower prices compared with imported products, the statement added.

The minister claimed that “timely signing of the agreements was imperative for taking forward the upgradation programme” and said the government would continue to facilitate refineries in addressing issues related to implementation of the policy.

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During a separate meeting with PARCO management, Malik was briefed on the company’s financial and operational performance and its wider plans to strengthen Pakistan’s energy security.

The minister “appreciated PARCO for managing its operations effectively during the Strait of Hormuz crisis” and said Pakistan had successfully managed the crisis and ensured that its petroleum supply system did not run dry.

“He emphasised that maintaining continuity of petroleum supplies and building resilient supply chains remained essential components of Pakistan’s energy security,” the ministry added.

Malik was also briefed on developments concerning the proposed Oil City in Hub, which is envisaged as a strategic energy terminal and storage complex. The project aims to strengthen energy security, enhance trade connectivity, support supply assurance and contribute to economic growth, according to the ministry.

At PRL, the managing director, board of directors and management briefed the minister on the company’s current financial and operational performance and measures taken to maintain continuity of refinery operations during the Strait of Hormuz crisis.

In separate meetings with Cnergyico, NRL and ARL, Malik sought the views of the respective managing directors on impediments to implementing the New Refinery Upgradation Policy.

The managing directors told the minister that their companies had completed the required preparations and were ready to sign the agreements.

Read More: Cabinet approves amendments to Oil Refining Policy for Euro-V fuel rollout

“The Managing Directors informed the Minister that their respective companies had completed the required preparations and were now ready to sign the agreements, which would constitute the first step towards implementation of the policy,” the ministry stated.

The managing director of ARL highlighted the need to upgrade existing refineries to ensure compliance with “changing global dynamics and evolving fuel standards” and appreciated Malik’s leadership and the ministry’s role in advancing reforms in the petroleum sector.

Malik reiterated that modernising Pakistan’s refining capacity was important “not only for improving the quality and efficiency of petroleum products but also for strengthening domestic supply resilience, reducing reliance on imported petrol and diesel, and advancing the country’s broader energy security objectives”.

He said the government remained committed to working with the refining industry to ensure “timely implementation of the New Refinery Upgradation Policy” and facilitate the investment required to modernise the sector.

Government amends refining policy

The development follows the Cabinet Committee on Energy’s approval in July of amendments to the Pakistan Oil Refining Policy 2023, aimed at facilitating the modernisation of the country’s existing refineries. The changes were designed to allow brownfield refinery projects to upgrade their facilities and produce Euro-V compliant petrol and diesel while reducing the output of furnace oil and other lower-value petroleum products.

At a meeting chaired by Prime Minister Shehbaz Sharif on July 28, the government described the upgrading of existing refineries as an “urgent national requirement” and a key pillar of Pakistan’s energy security. Officials said the production of Euro-IV and Euro-V compliant fuels would help meet environmental commitments, reduce air pollution and provide consumers with higher-quality fuel.

The government also directed authorities to promote the amended policy among potential investors, including through roadshows in Qatar, Saudi Arabia and other Gulf countries. Prime Minister Shehbaz stressed that the amended policy should be implemented “effectively and without delay”, while directing relevant ministries and institutions to accelerate the reform process.

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The approval came after weeks of uncertainty over proposed changes to the Brownfield Refinery Policy, with industry stakeholders expressing concern that the government could retrospectively reduce deemed duty protection from 7.5% to 5%.

Refinery representatives argued that such a move would penalise companies for delays they say were caused by the government's failure to execute Upgrade Agreements, despite the industry having accepted the draft agreements in 2024.

Government sources, however, maintained that the proposed reduction was linked to refineries' failure to sign the Upgrade Agreements within the stipulated timeframe.

Industry officials rejected that assertion, saying the agreements were never delayed by the refineries and that they had repeatedly requested the Petroleum Division, OGRA, and other government forums to complete the signing process.

The dispute centred on deemed duty protection, a key incentive under the 2023 policy, designed to support investment in refinery upgrades for the production of Euro-V compliant fuels and lower furnace oil output. Industry representatives contended that the 7.5% protection mechanism existed for more than two decades and argued that reducing it would undermine the economics of planned investments.

They also said that the changes introduced through the Finance Act 2024 — which shifted major petroleum products from the zero-rated to the exempt sales tax regime — significantly increased unrecoverable tax costs and further delayed implementation of the policy.