Govt Moves Draft Refinery Upgrade Agreements to ECC for Approval

For context, the Petroleum Division has sent draft Upgrade Agreements for existing and brownfield refineries to the Economic Coordination Committee for approval, paving the way for implementation of the amended refinery upgradation policy.

Key points

• The Cabinet Committee on Energy approved amendments to the Pakistan Oil Refining Policy for Upgradation of Existing and Brownfield Refineries, 2023, on July 28, 2026.
• Add ProPakistani to Preferred Sources and see more of our stories in Google Search and Top Stories.
• Under the amended framework, Inter State Gas Systems has been designated as the implementation entity on behalf of the Petroleum Division.
• Refineries failing to sign by October 1 will have to deposit the deemed duty above 5 percent on HSD into the Refinery Upgradation Account.
• The administration has additionally formed a committee comprising senior authorities from the Petroleum Division, Law and Justice Division, OGRA and SIFC to finalize the agreements.

In practice, the agreements are projected to unlock around $6 billion in investment in Pakistan's refining sector and backing projects aimed at increasing production of Euro V petroleum products, reducing furnace oil output and improving refinery efficiency.

For context, the Cabinet Committee on Energy approved amendments to the Pakistan Oil Refining Policy for Upgradation of Existing and Brownfield Refineries, 2023, on July 28, 2026. The federal cabinet ratified the changes on August 10. Govt Offers Farmers Rs. 25, 000 Rent.

Under the amended framework, Inter State Gas Systems has been designated as the implementation entity on behalf of the Petroleum Division. It will execute the Upgrade Agreements, operate Refinery Upgradation Accounts, monitor projects and administer incentive payments.

In practice, the administration has additionally formed a committee comprising senior authorities from the Petroleum Division, Law and Justice Division, OGRA and SIFC to finalize the agreements. Representatives from the Finance Division, NCMC, SIFC, ISGS and refineries additionally participated in consultations.

Meanwhile, the draft agreement provides a common framework covering the rights and obligations of the administration and refineries, project monitoring, verification of milestones and payment of incentives. While the Finance Division additionally submitted its comments, the Law Division discovered the agreement aligned with the refining policy. Govt Offers Farmers Rs. 25, 000 Rent.

In practice, the amended policy requires refineries to sign the agreements with the Petroleum Division within 45 days. Refineries that fail to execute the agreements by October 1, 2026, will face financial penalties under the revised framework.

In practice, the policy additionally shortens the project completion period to five years plus a one year cure period. While the incentive will be reduced by one percent if the project uses the full completion period, refineries completing projects within three years can receive an extra incentive of 0.5 percent of the capped limit for each year saved.

Refineries that fail to commission their upgraded projects within the maximum five year plus one year period could additionally face cancellation of their licenses.

For context, the administration expects the refinery upgrades to rise domestic petrol and diesel production, reduce lower value products and generate annual foreign exchange savings of around $1 billion. The policy is additionally anticipated to attract foreign investment into the refining sector.

Under the amended mechanism, refineries signing the Upgrade Agreements by October 1 will have the deemed duty on high speed diesel reduced to 2.5 percent, with the rate falling to zero by November 15, 2026. Refineries failing to sign by October 1 will have to deposit the deemed duty above 5 percent on HSD into the Refinery Upgradation Account. Stay Connected with ProPakistani.

Obtain the latest business news, market insights, and economic updates wherever you prefer. Follow on Google Discover.

Add as a preferredSource on Google Follow on Google News Join WhatsApp.

Taken together, the developments around govt Moves Draft Refinery Upgrade Agreements to ECC for Approval point to a situation that is still moving, and the coming days should bring more clarity.