The federal government will impose financial penalties on oil refineries that miss an October 1, 2026 deadline for signing Upgradation Agreements.
The Federal Cabinet approved the move while ratifying amendments proposed by the Cabinet Committee on Energy on July 28. The changes affect the Pakistan Oil Refining Policy for Upgradation of Existing Brownfield Refineries, 2023.
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The amended policy aims to increase domestic production of Euro-V petrol and diesel. It also seeks to reduce furnace oil and other lower-value products.
The Petroleum Division told the Cabinet that refinery upgrades could save Pakistan about $1 billion in foreign exchange annually. Officials also expect the policy to attract foreign investment, including potential investment from Saudi Arabia.
Cleaner domestic fuels could lower Pakistan’s reliance on imported petrol and diesel. They could also improve engine performance and reduce harmful emissions.
Refineries face reduced incentives and licence risk
Refineries must sign agreements with the Petroleum Division within 45 days instead of the earlier 60-day period. They will no longer sign these agreements with the Oil and Gas Regulatory Authority.
The Petroleum Division will also take over policy implementation and monitoring from OGRA. Incremental incentives will enter a Refinery Upgradation Account managed by the division rather than OGRA-controlled escrow accounts.
Independent third-party consultants will certify progress. Refineries that default or fall behind their physical targets cannot claim incentives until they complete corrective measures.
The Cabinet reduced the project completion timeline to five years. Refineries will receive a one-year cure period, but they will lose one percent of their incentive.
The government may grant another one-year extension if a refinery provides adequate justification. However, the competent authority may revoke licences if upgraded projects remain incomplete after the maximum five-year period and cure year.
Projects that begin operations within three years may earn an additional incentive. The reward will equal 0.5 percent of the capped limit for every year saved.
A refinery missing the October 1 signing deadline must deposit deemed duty above five percent on high-speed diesel into the upgrade account. The payment period will start from the agreement’s signing date, while transfers must finish by June 30, 2027.
For timely signatories, deemed duty on HSD will fall to 2.5 percent. The rate will decline to zero by November 15, 2026.
The Cabinet also barred international arbitration without its approval. Officials will add missing definitions to prevent ambiguity in the amended policy.
Five refineries signal readiness for $6 billion upgrades
Petroleum Minister Ali Pervaiz Malik met management teams from Pakistan’s five refineries on August 26. The companies included PARCO, PRL, NRL, Cnergyico and Attock Refinery Limited.
The meeting reviewed policy implementation, operational and financial performance, and measures to strengthen Pakistan’s energy security.
All five refineries reaffirmed their readiness to sign the upgrade agreements. The Petroleum Division said the deals could unlock about $6 billion in refinery investment.
Read More: Pakistan’s Five Refineries Ready for $6 Billion Upgrade Push
“All the refineries are ready to sign modernisation agreements, involving a huge investment of $6 billion to kick-start local production of Euro 5-compliant fuel besides lowering the import bill of petrol and diesel,” Malik said.
However, an industry executive said the revised policy still awaits formal notification.
“Amendments in Pakistan Oil Refining Policy for Upgradation of Existing Brownfield Refineries, 2023 has not yet been notified,” the executive said.
The executive added that refineries must sign with the Petroleum Division within 45 days after the government notifies the revised policy.
