Pakistan’s $6 Billion Refinery Upgrade Plan Faces Another Setback

Pakistan’s long-delayed $6 billion refinery upgrade program faces renewed uncertainty after the Oil and Gas Regulatory Authority proposed reducing a key incentive for refineries that missed a deadline to sign implementation agreements.

Under draft amendments to the Brownfield Refinery Policy 2023, Ogra has proposed cutting the deemed duty incentive on high-speed diesel from 7.5 percent to 5 percent for refineries that did not sign implementation agreements by October 22, 2024.

The remaining 2.5 percent, after applicable taxes, would be transferred to the Inland Freight Equalization Margin Pool.

Refineries have strongly opposed the proposed reduction, arguing that it would act as a retrospective penalty and undermine the financial viability of projects already affected by unresolved taxation issues and policy uncertainty. Industry representatives say delays in signing the agreements were beyond their control.

A senior Petroleum Division official said the latest proposal has once again put the refinery upgrade initiative at risk despite recent efforts to resolve tax-related hurdles. The National Committee for Monitoring and Coordination met on Wednesday and assured refiners that their concerns would be considered before the amendments are finalized. Refinery representatives were also asked to commit to signing the pending implementation agreements after Parliament approves the Finance Bill 2026-27.

Introduced in 2023, the Brownfield Refinery Policy aims to attract nearly $6 billion in investments to upgrade five local refineries, including PARCO, Attock Refinery, National Refinery, Cnergyico, and Pakistan Refinery Limited.

The modernization plan is intended to help refineries produce cleaner Euro V-compliant fuels, double petrol production, increase diesel output by 50 percent, reduce furnace oil production by 80 percent, and strengthen Pakistan’s energy security by lowering reliance on imported petroleum products.