The Oil and Gas Regulatory Authority (OGRA) of Pakistan, in collaboration with several key oil refineries, is expediting the implementation of upgrade agreements worth $4.5 billion.
This ambitious initiative aims to enhance the country’s refining capacity significantly.
Prominent players involved in this substantial upgrade include Pak-Arab Refinery Limited (PARCO), Attock Refinery Limited (ARL), National Refinery Limited (NRL), Pakistan Refinery Limited (PRL), and Cnergyico Pk Limited (CNERGY).
“We are focused on fast-tracking the $1.08 billion upgrade of the PRL plant in Karachi,” said OGRA Chairman Masroor Khan.
This effort is just one part of a broader strategy. In addition, there are agreements for a $1.3 billion upgrade at ARL and a $1.4 billion upgrade deal with PARCO and CNERGY, which are currently nearing completion.
These upgrades aim to bring the refineries up to Euro-V specifications, allowing them to adjust production to maximize petrol and diesel output while minimizing furnace oil (FO) production.
Five local refineries have signed contracts to enhance domestic production capabilities, which is expected to reduce Pakistan’s dependency on imports.
Over the past five years, Pakistan’s total average petroleum product requirement stood at 24 million tons, of which 11.35 million tons were produced locally, with the remainder imported.
Despite a total capacity of 20 million tons, the country’s refineries have been underutilized, primarily due to reduced demand for furnace oil, especially in the power sector.
To address this issue, the government introduced a policy in August 2023, which was amended in February to encourage the upgrade of brownfield refineries.
Under this policy, refineries opting for the upgrade will receive additional tariff protection or deemed duty incentives.
Specifically, there is a 10 percent incentive for petrol and a 2.5 percent incentive 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 notification date of the policy amendment.
This move is designed to support domestic production and refinery upgrades, ensuring competitiveness in the market.
In the gas sector, companies like Sui Southern Gas Company Limited (SSGCL) and Sui Northern Gas Pipelines Limited (SNGPL) have also seen significant regulatory activity.
Petitions related to the Final Revenue Requirement (FRR) and Estimated Revenue Requirement (ERR) have been thoroughly evaluated, considering both financial and technical viability.
Public hearings were conducted to incorporate feedback from the general public and stakeholders, ensuring transparency in the decision-making process.
OGRA is also addressing a 9 percent annual decline in natural gas production. Measures include imposing a ban on new gas connections and tackling the issue of non-standard gas cylinders, although enforcement remains challenging due to the lack of severe penalties.
In summary, the collaborative efforts of OGRA and major oil refineries are set to revolutionize Pakistan’s refining capacity.
The $4.5 billion investment will bring significant upgrades, enhance production capabilities, and reduce reliance on imports.
This strategic move is poised to strengthen the country’s energy sector, ensuring sustainable growth and development for the future.
