ISLAMABAD: Pakistan is set to sign agreements with five oil refineries on Thursday, paving the way for more than $6 billion in planned investment to modernise ageing plants, increase domestic petrol and diesel production and reduce reliance on imports.
The agreements involve Pak-Arab Refinery Ltd. (PARCO), Pakistan Refinery Ltd. (PRL), National Refinery Ltd. (NRL), Cnergyico and Attock Refinery Ltd. (ARL), according to a senior Petroleum Division official.
The official said the agreements were being finalised through meetings between the Petroleum Division and Inter-State Gas Systems (ISGS), with the signing expected on Thursday.
The government has authorised ISGS to sign the agreements and oversee their implementation, replacing an earlier arrangement under which the Oil and Gas Regulatory Authority (OGRA) was expected to manage the process.
What will the refinery upgrades achieve?
The modernisation programme is designed to increase domestic production of petrol and diesel while reducing Pakistan’s dependence on imported refined petroleum products.
An ISGS official said the upgraded refineries would also be capable of processing a wider range of crude, including Iranian and Russian supplies, subject to applicable laws and international sanctions.
The projects are being pursued under the Brownfield Refinery Policy, which provides incentives for upgrading existing refining capacity.
Could financing concerns delay the projects?
Industry sources have warned that signing the agreements alone will not guarantee investment unless the projects remain financially viable for lenders.
A key concern is a reported change in the mechanism for handling incentive funds, with government-controlled accounts potentially replacing jointly controlled escrow accounts envisaged under the refinery policy.
Industry officials argue that the change could affect the security, control and accessibility of funds and potentially make it harder for projects to secure financing and reach financial close.
“Signing an agreement is only the first step,” a senior industry source said, adding that the key test would be whether lenders accept the structure, financial close is achieved and investment begins flowing into refinery upgrades.
The Petroleum Division spokesman did not respond to repeated calls or detailed questions regarding the reported change in the escrow mechanism.