$5-6bn upgrade: Refineries get 6 months more to sign agreements

ISLAMABAD: The Cabinet Committee on Energy (CCoE), which met here on Friday with Prime Minister Shehbaz Sharif in the chair, extended the deadline by another six months for local refineries to sign the implementation agreements (IAs) with the Oil & Gas Regulatory Authority (OGRA) for their $5-6 billion upgrade projects.

The extension was given under the amended brownfield refineries’ policy 2023 just to accommodate the country’s two bigger refineries – Pak-Arab Refinery Company (PARCO) and Cnergyico – having over 50 per cent contribution to refining output.

However, the local refineries, such as Attock Refinery Limited (ARL), Pakistan Refinery Limited (PRL) and National Refinery Limited (NRL), which earlier showed dismay at delay in signing of the IAs of all local refineries, have been allowed to sign the IAs so that they could start investing about $3 billion in their upgrade projects in the next seven years. PARCO and Cnergyico, however, have been given six more months for inking the implementation agreements.

The CCoE also directed the authorities concerned to make a comprehensive strategy for the upgrade projects by looping in all refineries.

The earlier deadline for signing the IAs was April 22, 2024, but PARCO did not submit its upgrade project because of no decision by its Board of Directors (BoD). The proposed extension in the deadline would enable PARCO to come up with its upgrade project after conducting its feasibility and Cnergyico to settle the dues of Rs47.5 billion in the head of petroleum levy with the FBR and Finance Division. The government had earlier approved the local refineries’ upgrade policy to ensure environment-friendly Euro-V fuels and decrease the production of furnace oil.

The deadline for signing of upgrade agreements with OGRA was April 22, 2024. Three refineries – ARL, NRL and PRL – had given consent to sign the agreements before the deadline and two refineries PARCO and Cnergyico needed more time for the purpose. But the Petroleum Division did not arrange for signing of agreements with the willing refineries. It may be noted that the refining policy had already taken more than four years in the making, causing about four billion-dollar loss to the country.

“The ARL, NRL and PRL plan to invest three billion dollars on their upgrade projects. The total investment will go up to $6 billion when PARCO and Cnergyico join in.”

The government seems to be more focused on attracting foreign investment, which is no doubt important, but it needs to realise that foreign investment flows in only when existing foreign and local investors are listened to. As per the summary, sent to the CCoE, under the amended policy, PARCO is in process of updating its feasibility study after which its board of directors will take decision on the planned upgrade.