The federal government has decided to penalise oil refineries that fail to sign agreements for upgrading their plants by October 1, 2026, as part of efforts to modernise Pakistan’s ageing refining sector.
Well-informed sources in the Petroleum Division told Business Recorder that the decision was approved by the Federal Cabinet while ratifying amendments to the Pakistan Oil Refining Policy for Upgradation of Existing Brownfield Refineries, 2023.
Under the revised policy, refineries must sign Upgradation Agreements (UAs) with the Ministry of Energy’s Petroleum Division within 45 days of the policy’s notification. Refineries that miss the October 1 deadline will have to deposit the deemed duty above five percent on high-speed diesel (HSD) into the Refinery Upgradation Account.
The transfer of these funds must be completed by June 30, 2027.
The government has also linked financial incentives to the progress of upgrade projects. Refineries that sign agreements by October 1 will see the deemed duty on HSD fall to 2.5 percent, before being reduced to zero by November 15.
The upgraded refineries are expected to produce Euro-V compliant petrol and diesel, increase fuel production and reduce output of furnace oil and other low-value products. The government estimates the projects could save around $1 billion in foreign exchange each year and attract significant foreign investment.
The policy is also expected to support around $6 billion in investment in the refining sector. Saudi Arabia has already shown interest in investing in Pakistan’s refinery industry.
The cabinet also approved a five-year completion period for upgrades, followed by a one-year cure period. Refineries that fail to complete their projects within the maximum six-year period could face licence cancellation.
Meanwhile, Petroleum Minister Ali Pervaiz Malik met the managements of PARCO, PRL, NRL, Cnergyico and Attock Refinery on August 26 to review progress on the policy.
The Petroleum Division said all five refineries had reaffirmed their willingness to sign the agreements, with signing expected early next month.
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