Meeting Euro standards: Oil refineries seek $1b in government assistance

Money will be spent on setting up desulphurisation plants.

Our Correspondent July 31, 2012


Oil refineries have sought a financial support of $1 billion, to be recovered from the consumers, for setting up desulphurisaton plants, which will produce clean fuel to comply with Euro-II emission standards.

The demand comes despite the fact that the oil refineries have received billions of rupees on account of deemed duty from the consumers.

The refineries have proposed that the cost can be recovered from the oil consumers in the form of Rs2.5 per litre. To discuss the proposal, the Ministry of Petroleum has constituted a task force, which will meet today (Wednesday).

The Economic Coordination Committee (ECC) of the cabinet has given time to the refineries as it has extended the deadline for setting up desulphurisation plants to July 1, 2014.

Chief executive officers of the oil refineries came under fire from Climate Change Minister Rana M Farooq Saeed Khan in a high-level meeting on Tuesday, when they said they could not introduce Euro-II diesel without getting incentives and support from the government.

Khan warned that the Lahore High Court (LHC) had already given a verdict against the refineries, according to which they had to set up desulphurisation plants in 2010 and they could face contempt of court if anyone filed a petition.

It was also pointed out in the meeting that the petroleum ministry had, in a letter to the refineries in 2008, set a deadline of July 1, 2012 for establishing such plants but no progress had been made. Pak Arab Refinery Company (Parco) is the only refinery that has started producing Euro-II diesel in the country.

According to petroleum ministry officials, oil refineries had got Rs150 billion on account of deemed duty since 2002, which was also meant to be spent on setting up desulphurisation plants to upgrade petroleum products for a pollution-free environment. A judicial commission, constituted by the Supreme Court, had also pointed out that the refineries had not used the deemed duty for establishing the plants.

The climate change minister asked the petroleum ministry officials to approach the ECC to seek a review of its decision on extending the deadline for the refineries.

According to a statement issued here, the minister expressed the resolve that the country would improve its fuel quality to comply with Pak-II (Euro-II) emission standards and bring down pollution levels in cities.

However, he pointed out that adequate time had been given to the refineries to make available low-sulphur diesel in the country, but unfortunately the deadline was not met. “This delay has left Pakistan behind other countries of the region in adopting Euro emission standards,” he said.

The CEOs of refineries argued that one plant required an investment of $250 million and the refineries needed a total $1 billion for installing the desulphurisation plants with no expected increase in production volume and profit.

They stressed that they were ready to install the plants provided the government gave assistance as well as a clear policy. They said a timeframe up to 2014 had already been given by the ECC for compliance with Euro-II standards.

It was also decided in the meeting that they would meet again soon to finalise a roadmap for early resolution of the issue.

Published in The Express Tribune, August 1st, 2012.


Jameel ur Rasheed | 10 years ago | Reply

All consumer should stop buying fuel from all any compnay other then PARCO-Total. This will persuade them to install the required standard refinery!

Asim | 10 years ago | Reply

It cost Parco $132 million to set up Diesel Hydro Desulphurization (DHDS) Plant for producing EURO II diesel.

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