Prime Minister Shehbaz Sharif is expected to decide the future of Pakistan’s Brownfield Refinery Policy today, as the Cabinet Committee on Energy (CCoE) considers amendments that could determine the fate of billions of dollars in refinery upgrade investments.
According to official documents, the committee will review proposed changes to the Pakistan Oil Refining Policy for Upgradation of Existing Brownfield Refineries, 2023, following consultations with the Oil and Gas Regulatory Authority (OGRA), the Finance Division, and the petroleum industry.
Approved in 2023, the Brownfield Refinery Policy is intended to attract around $6 billion in refinery upgrades to produce cleaner Euro V fuels, reduce furnace oil production, and improve Pakistan’s energy security. Implementation, however, has been delayed by tax changes and unresolved policy issues.
The main point of contention is a proposal to reduce deemed duty protection from 7.5 percent to 5 percent, which refinery operators say would retrospectively penalize them for delays caused by the government rather than the industry. Refinery officials maintain they had accepted the draft Upgrade Agreement in 2024 and were waiting for the government to formally execute the agreements.
Industry representatives argue that the 7.5 percent deemed duty protection has remained in place for more than two decades and is a key incentive supporting investments in refinery modernization. They warn that reducing it to 5 percent could undermine projects aimed at producing Euro V compliant fuels, reducing furnace oil production, and improving Pakistan’s fuel mix.
The refining sector also says the Finance Act 2024, which shifted petroleum products from the zero rated to the exempt sales tax regime, increased unrecoverable tax costs and weakened the financial viability of planned refinery upgrades. The Petroleum Division has acknowledged that the tax changes adversely affected the economics of the projects.
Officials said the Petroleum Division has proposed limited amendments to operationalize the policy while preserving its original objectives and has recommended forming a committee comprising representatives from the Petroleum Division, Law Division, OGRA, and the Special Investment Facilitation Council (SIFC) to finalize the Upgrade Agreement. H
owever, OGRA has expressed reservations about becoming a signatory to commercial agreements, arguing that its role should remain limited to regulation.
The refining industry hopes the government will retain the original incentive framework, saying policy certainty is essential to unlock long delayed investments and strengthen Pakistan’s energy security.
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