Key Takeaways
- Pakistan’s oil refineries urge the government to finalize and sign Upgrade and Escrow Agreements.
- Companies warn that delays will extend financial penalties despite meeting obligations.
- Amended policy aims to improve fuel quality but faces implementation challenges.
Pakistan's oil refineries have urged the government to immediately finalize and sign the Upgrade and Escrow Agreements under the amended Brownfield Refineries Upgradation Policy, warning that any further delay will extend financial penalties despite meeting their obligations.
Attock Refinery Limited (ARL) has objected to a retrospective reduction in deemed duty protection for refineries that had not formally signed the Upgrade Agreements by October 22, 2024. ARL stated it and National Refinery Limited (NRL) completed all required steps before the deadline.
The company argued that delays on the government’s side prevented the agreements from being executed, requesting immediate circulation of revised drafts to finalize without further delay.
Uncertainty surrounds which government entity will execute and oversee the agreements. While OGRA is designated as responsible for signing and monitoring, officials are considering transferring these responsibilities to the Petroleum Division, requiring another policy amendment.
Under the amended framework, refineries that failed to sign by the deadline face a reduction in deemed duty protection on High-Speed Diesel (HSD) from 7.5 percent to 5 percent, a retrospective cut of 2.5 percentage points.
The Brownfield Refineries Upgradation Policy was approved in 2023 to encourage nearly $6 billion in investments aimed at upgrading aging refineries and improving fuel quality to Euro-V standards.
However, implementation stalled for nearly two years due to disagreements over legal protections, implementation agreements, and tax treatment. Last week, the Cabinet Committee on Energy approved amendments intended to remove these bottlenecks and revive the long-delayed investment programme.
