Refineries in Pakistan are gearing up to meet Euro-V specifications and adjust their production to maximize petrol and diesel output while reducing furnace oil (FO) production under the new upgrade policy.
According to Arif Habib Limited, this upgrade is expected to significantly increase petrol (99 percent) and diesel (47 percent) production while slashing furnace oil production by 78 percent.
The government, in collaboration with the refinery industry, has devised a refinery upgradation policy. Already, refineries have started feasibility studies for independent upgrades. Over the last five years, Pakistan’s total average petroleum product requirement was 24 million tons, with 11.35 million tons produced locally and the rest imported.
Despite having a total capacity of 20 million tons, Pakistan’s refineries have been underutilized due to lower demand for furnace oil, especially in the power sector. To address this, the government announced a policy in August 2023, amended in February, to upgrade brownfield refineries.
Refineries that opt for the policy will receive additional tariff protection or deemed duty incentives, with a 10 percent incentive for petrol and 2.5 percent for diesel over seven years.
Presently, in Pakistan, there are five oil refining companies, namely, Pak-Arab Refinery Limited (PARCO), Attock Refinery Limited (ATRL), National Refinery Limited (NRL), Pakistan Refinery Limited (PRL) and Cnergyico Pk Limited (CNERGY). They are expected to enhance their capacity for petrol and diesel while significantly reducing furnace oil production.
After the policy’s adoption by these refineries, daily capacities for petrol and diesel are projected to increase, with furnace oil production decreasing substantially. This shift in production aligns with the country’s changing energy mix, marked by declining demand for furnace oil in power generation.
The policy also includes a provision for a minimum 10 percent customs duty on imported petrol and diesel for seven years from the policy amendment’s notification date. This move aims to support domestic production and refinery upgrades while ensuring competitiveness in the market.
