Draft refinery upgrade agreement finalised

The Petroleum Division has placed the finalised plant upgrade agreement for the country's existing refineries for approval of the Economic Coordination Committee (ECC), paving the way for implementation of the amended Pakistan Oil Refining Policy for Upgradation of Existing/Brownfield Refineries, 2023.

According to an official, the draft agreement has been finalised following consultations involving the Petroleum Division, Law and Justice Division, Oil and Gas Regulatory Authority (Ogra), Special Investment Facilitation Council (SIFC), Finance Division, Inter State Gas Systems (ISGS), refineries and other stakeholders.

The Petroleum Division has now sought the ECC's green light for the agreement so that the revised refinery policy can be operationalised. "To operationalise the Pakistan Oil Refining Policy for Upgradation of Existing/Brownfield Refineries, 2023 (as amended in August 2026), in a timely manner, the draft upgrade agreement has been submitted for consideration and approval of the ECC," the official said.

The development marks an important step towards implementing the refinery upgrade programme, which is aimed at encouraging existing refineries to undertake major investment projects for production of environmentally clean Euro-V petroleum products, reduction in furnace oil output and improvement in their overall configuration and efficiency. The government had amended the refinery policy following its approval by the Cabinet Committee on Energy (CCOE) on July 28, 2026. The amendments were subsequently ratified by the federal cabinet on August 10. Under the policy, the refineries seeking incentives are required to execute upgrade agreements with the Petroleum Division or its designated entity.

ISGS to implement policy

Following approval of the amended policy, the government designated ISGS as the policy implementation entity on behalf of the Petroleum Division. ISGS will perform a wide range of functions, including execution of upgrade agreements, operating refinery upgrade accounts, monitoring of upgrade projects, appointment of technical consultants and auditors, and administration of incentive payments from the up-gradation accounts.

The government also constituted a committee comprising the petroleum secretary, law and justice secretary, Ogra chairman and SIFC to finalise the upgrade agreement. The ECC was informed that the committee held consultative meetings to update the earlier agreement finalised by Ogra and the refineries and align it with the amended policy and revised implementation arrangements. Representatives of the Finance Division, National Coordination and Management Council (NCMC), SIFC, ISGS and refineries also assisted the committee, while legal firm Orr Dignam provided legal assistance.

The finalised agreement provides a uniform contractual framework for implementation of refinery upgrade projects. It spells out rights and obligations of parties as well as mechanisms for monitoring projects, administering refinery up-gradation accounts, verifying project milestones and disbursing incentives.

Law Division clears agreement

The Petroleum Division shared the agreement with the Law and Justice Division and Finance Division for formal comments on September 1. The Law Division subsequently conveyed that the agreement was "in order and aligned with the refining policy", according to the summary.

The Finance Division also submitted its comments, which were examined alongside counter-comments before the agreement was submitted to the ECC.

Officials said the approval of the agreement would remove a major procedural hurdle to implementation of the policy and enable the government and participating refineries to move towards execution of their respective upgrade arrangements.

The refinery upgrade policy has been billed as a major initiative to modernise Pakistan's ageing refining infrastructure. The planned projects are intended to enable local refineries to produce cleaner fuels meeting Euro-V specifications while substantially reducing production of furnace oil, for which domestic demand has declined over the years.

The government expects refinery modernisation to improve the domestic petroleum product mix and reduce reliance on imports of higher-quality fuels.

The ECC has been informed that the agreement had already been finalised through a consultative process and, therefore, the case was not circulated for further comments. The ECC's nod will allow the Petroleum Division to proceed with the finalised contractual framework and push the amended refinery policy towards implementation.