Pakistan’s Refineries Agree to Upgrade Plants Despite New Penalty

Pakistan's oil refineries are ready to sign long-delayed agreements to upgrade their plants despite objecting to a new penalty that requires them to surrender 2.5 percent of the deemed duty retained on diesel.

Key points

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• The policy, initially approved in August 2023 and amended twice since then, intends to attract investment to modernize Pakistan's aging refining infrastructure.
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• Khattak remarked delays in upgrading domestic refineries cost Pakistan around $1.5 billion each year through higher fuel imports and related foreign exchange outflows.
• He remarked the financial impact was significant, with Attock Refinery facing a penalty of Rs.

Although they maintain that the penalty is unfair as the delays were not caused by them, the refineries have welcomed the government's amended Brownfield Refinery Policy and remarked they are prepared to proceed with the agreements.

Notably, the policy, initially approved in August 2023 and amended twice since then, intends to attract investment to modernize Pakistan's aging refining infrastructure. While the Petroleum Division expects them to be signed by the end of August. $30 Billion Import Data Discrepancy Forces Pakistan to Revise Figures, petroleum Minister Ali Pervaiz Malik has remarked the agreements will be finalized shortly.

As previously planned, under the new arrangement, the agreements will be signed with Interstate Gas Systems (ISGS), under the Petroleum Division, instead of the Oil and Gas Regulatory Authority (Ogra).

Adil Khattak, CEO of Attock Refinery Limited and Chairperson of the Energy Committee of the Overseas Investors Chamber of Commerce and Industry, remarked Attock Refinery and National Refinery had completed key formalities before the earlier October 22, 2024 deadline, including initialing agreements with Ogra, obtaining board approvals and arranging Rs. 1 billion bank guarantees each.

Khattak remarked refineries were still being asked to return 2.5 percent of the deemed duty retained on diesel between the earlier deadline and the signing of the new agreements. He remarked the financial impact was significant, with Attock Refinery facing a penalty of Rs. 7.5 million for every day of delay.

For context, the Petroleum Division shared draft upgrade agreements with refineries on Thursday, with consultations projected to continue with the Ministry of Finance, Controller of Accounts and ISGS before the documents are finalized. Despite their objection to the penalty, refineries remarked the dispute would not prevent them from signing the agreements.

Khattak remarked delays in upgrading domestic refineries cost Pakistan around $1.5 billion each year through higher fuel imports and related foreign exchange outflows. He continued that modernization had become increasingly notable for energy security after recent disruptions in international energy markets. Attock Refinery has already largely completed front-end engineering work and has began discussions with banks to arrange financing for the upgrade. Stay Connected with ProPakistani.

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