Refineries Failing to Sign Upgradation Deals by Oct 1 to Face Penalties

Oil refineries that fail to sign upgradation agreements with the Ministry of Energy's Petroleum Division by October 1, 2026, will face financial penalties under the amended brownfield refinery policy approved by the Federal Cabinet.

Key points

• The Cabinet has ratified the amendments approved by the Cabinet Committee on Energy to the Pakistan Oil Refining Policy for Upgradation of Existing Brownfield Refineries, 2023.
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• A key change approved by the Cabinet is the financial consequence for refineries that miss the October 1 deadline.
• The Petroleum Division has remarked the refinery upgrades could generate annual foreign exchange savings of concerning USD 1 billion and attract foreign investment into the sector.

Notably, the Cabinet has ratified the amendments approved by the Cabinet Committee on Energy to the Pakistan Oil Refining Policy for Upgradation of Existing Brownfield Refineries, 2023.

Meanwhile, the revised framework is intended to push refineries toward upgrading their facilities, increasing petrol and diesel production, producing Euro V-compliant fuels, and reducing reliance on furnace oil and other lower-value products.

For context, a key change approved by the Cabinet is the financial consequence for refineries that miss the October 1 deadline. Such refineries will have to deposit the deemed duty above 5 percent on high-speed diesel into the Refinery Upgradation Account. The amount will be calculated from the date of signing of the Upgradation Agreement, with the transfer required to be completed by June 30, 2027. FWO Seeks to Recover $432 Million Pipeline Investment in 4 Years.

In practice, the Cabinet has additionally created a declining deemed duty structure for refineries that meet the deadline. Refineries signing their agreements by October 1 will face a reduced deemed duty of 2.5 percent on high speed diesel. It will fall to zero by November 15, 2026.

Meanwhile, the policy additionally requires refineries to sign the agreements with the Petroleum Division within 45 days, replacing the earlier 60 day period and shifting implementation and monitoring responsibilities from the Oil and Gas Regulatory Authority to the Petroleum Division.

Meanwhile, the revised policy is additionally designed to tie incentives more closely to actual progress on refinery projects. While refineries that default on their projects or fall behind schedule will be prevented from receiving incentives until corrective measures are taken, independent third party consultants will certify progress. Projects completed within three years will qualify for an extra incentive equivalent to 0.5 percent of the capped limit for every year saved.

Meanwhile, the Cabinet has set the project completion period at five years, followed by a one year cure period, with a one percent reduction in incentive. The administration may allow another one year extension if sufficient justification is provided.

Refineries that fail to commission their upgraded facilities within the maximum five year plus one year period could have their licenses revoked by the competent authority. International arbitration will additionally require Cabinet approval under the revised framework. Islamabad Could Run Itself Like a Province Under New Plan.

Notably, the Petroleum Division has remarked the refinery upgrades could generate annual foreign exchange savings of concerning USD 1 billion and attract foreign investment into the sector. While the overall agreements are projected to unlock concerning USD 6 billion in investment, saudi Arabia has already expressed interest in investing in Pakistan's refining industry.

In practice, the administration is now looking to Pakistan's five major refineries, Pak Arab Refinery Limited, Pakistan Refinery Limited, National Refinery Limited, Cnergyico and Attock Refinery Limited, to move ahead with the agreements.

Petroleum and Natural Resources Minister Ali Pervaiz Malik met the managements of the five refineries on August 26 to review progress under the brownfield upgradation policy, along with their financial and operational performance and measures to strengthen energy security.

According to the Petroleum Division, all five refineries reaffirmed their readiness to sign agreements under the policy, with the agreements projected to be signed early next month.

Nevertheless, a senior executive of one refinery stated the amendments to the policy had not yet been notified. According to The executive, once the revised policy is notified, refineries will have 45 days to sign their agreements with the Petroleum Division. Stay Connected with ProPakistani.

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In short, refineries Failing to Sign Upgradation Deals by Oct 1 to Face Penalties is the central thread here, and readers can expect follow-up reporting as the picture becomes clearer.