The Oil and Gas Regulatory Authority (OGRA) and several oil refineries are expediting the implementation of the $4.5 billion upgrade agreements for enhancing the country’s refining capacity.
Key players include Pak-Arab Refinery Limited (PARCO), Attock Refinery Limited (ATRL), National Refinery Limited (NRL), Pakistan Refinery Limited (PRL) and Cnergyico Pk Limited (CNERGY).
According to OGRA Chairman Masroor Khan, the ongoing efforts are centered on fast-tracking a $1.08 billion upgrade of the PRL plant in Karachi. Other agreements include a $1.3 billion upgrade of ARL and a $1.4 billion deal with PARCO and CNERGY, which are now in the final stages.
These upgrades will enable refineries to meet Euro-V specifications and adjust their production to maximize petrol and diesel output while reducing furnace oil (FO) production. Contracts have been signed with five local refineries to enhance domestic production and reduce dependency on imports.
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 have opted 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.
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.
In the gas sector (SSGCL and SNGPL), petitions pertaining to Final Revenue Requirement (FRR) and Estimated Revenue Requirement (ERR) have been evaluated after conducting due diligence vis a vis financial and technical viability. While making decisions, public hearings were also conducted to take input from the general public as well as stakeholders.
It bears mentioning that OGRA is also tackling a 9 percent annual decline in natural gas production by imposing a ban on new gas connections and addressing the issue of non-standard gas cylinders, despite challenges with enforcement due to the lack of severe penalties.
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