Oil refineries that fail to sign upgradation agreements with the Ministry of Energy’s Petroleum Division by October 1, 2026, will face financial penalties under the amended brownfield refinery policy approved by the Federal Cabinet.
The Cabinet has ratified the amendments approved by the Cabinet Committee on Energy to the Pakistan Oil Refining Policy for Upgradation of Existing Brownfield Refineries, 2023.
The revised framework is intended to push refineries toward upgrading their facilities, increasing petrol and diesel production, producing Euro V-compliant fuels, and reducing reliance on furnace oil and other lower-value products.
A key change approved by the Cabinet is the financial consequence for refineries that miss the October 1 deadline. Such refineries will have to deposit the deemed duty above 5 percent on high-speed diesel into the Refinery Upgradation Account. The amount will be calculated from the date of signing of the Upgradation Agreement, with the transfer required to be completed by June 30, 2027.
The Cabinet has also created a declining deemed duty structure for refineries that meet the deadline. Refineries signing their agreements by October 1 will face a reduced deemed duty of 2.5 percent on high speed diesel, which will fall to zero by November 15, 2026.
The policy also requires refineries to sign the agreements with the Petroleum Division within 45 days, replacing the earlier 60 day period and shifting implementation and monitoring responsibilities from the Oil and Gas Regulatory Authority to the Petroleum Division.
The revised policy is also designed to tie incentives more closely to actual progress on refinery projects. Independent third party consultants will certify progress, while refineries that default on their projects or fall behind schedule will be prevented from receiving incentives until corrective measures are taken. Projects completed within three years will qualify for an additional incentive equivalent to 0.5 percent of the capped limit for every year saved.
The Cabinet has set the project completion period at five years, followed by a one year cure period, with a one percent reduction in incentive. The government may allow another one year extension if sufficient justification is provided.
Refineries that fail to commission their upgraded facilities within the maximum five year plus one year period could have their licenses revoked by the competent authority. International arbitration will also require Cabinet approval under the revised framework.
The Petroleum Division has said the refinery upgrades could generate annual foreign exchange savings of about USD 1 billion and attract foreign investment into the sector. Saudi Arabia has already expressed interest in investing in Pakistan’s refining industry, while the overall agreements are expected to unlock about USD 6 billion in investment.
The government is now looking to Pakistan’s five major refineries, Pak Arab Refinery Limited, Pakistan Refinery Limited, National Refinery Limited, Cnergyico and Attock Refinery Limited, to move ahead with the agreements.
Petroleum and Natural Resources Minister Ali Pervaiz Malik met the managements of the five refineries on August 26 to review progress under the brownfield upgradation policy, along with their financial and operational performance and measures to strengthen energy security.
According to the Petroleum Division, all five refineries reaffirmed their readiness to sign agreements under the policy, with the agreements expected to be signed early next month.
However, a senior executive of one refinery said the amendments to the policy had not yet been notified. The executive said that once the revised policy is notified, refineries will have 45 days to sign their agreements with the Petroleum Division.
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