Refineries Urge Govt to Finalize Upgrade Agreements Without Delay

Pakistan's oil refineries have urged the government to immediately finalize and sign the Upgrade and Escrow Agreements under the amended Brownfield Refineries Upgradation Policy, warning that any further delay will extend the financial penalty imposed on them despite meeting their obligations.

In a letter to the Petroleum Division, Attock Refinery Limited (ARL) welcomed the Cabinet Committee on Energy's recent approval of amendments to the Brownfield Refineries Upgradation Policy but objected to the retrospective reduction in deemed duty protection for refineries that had not formally signed the Upgrade Agreements by October 22, 2024.

ARL said it, along with National Refinery Limited (NRL), had completed all required steps before the deadline, including obtaining board approvals, initialing the draft agreements with the Oil and Gas Regulatory Authority (OGRA), and arranging the required bank guarantees. The company argued that the agreements could not be executed because of delays on the government's side.

The refinery has requested the Petroleum Division to immediately circulate the revised drafts of the Upgrade and Escrow Agreements so the documents can be finalized without further delay.

The issue has also highlighted uncertainty over which government entity will execute and oversee the agreements. While the amended policy approved by the CCoE designates OGRA as the authority responsible for signing and monitoring the agreements, officials are reportedly considering transferring those responsibilities to the Petroleum Division. Any such change would require another amendment to the policy.

Under the amended framework, refineries that failed to sign the agreements by the deadline face a reduction in deemed duty protection on High-Speed Diesel (HSD) from 7.5 percent to 5 percent, a retrospective cut of 2.5 percentage points. Refiners argue that continuing delays in executing the agreements are unfairly prolonging this financial penalty.

Pakistan approved the Brownfield Refineries Upgradation Policy in 2023 to encourage nearly $6 billion in investments aimed at upgrading aging refineries, improving fuel quality to Euro-V standards, increasing production of high-value petroleum products, and reducing the country's reliance on imported fuels.

However, implementation stalled for nearly two years due to disagreements over legal protections, implementation agreements and tax treatment. Last week, the Cabinet Committee on Energy approved amendments intended to remove those bottlenecks and revive the long-delayed investment programme.

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