ISLAMABAD: Pakistan has introduced a new oil refining policy aimed at cutting dependence on imported petroleum products while boosting local production of petrol and diesel.
The policy, approved by the federal government, is expected to attract nearly $6 billion in investment for the country’s refining industry. It was prepared in collaboration with key stakeholders, including the Special Investment Facilitation Council (SIFC).
A major objective of the policy is to upgrade Pakistan’s ageing refineries, increase the output of petrol and high-speed diesel, reduce furnace oil production, and improve fuel quality by promoting the production of Euro 5-standard fuels. To encourage refinery upgrades, the government will offer a seven-year incentive package.
Under the new framework, refinery companies must sign implementation agreements with the Oil and Gas Regulatory Authority (OGRA) within 90 days of the policy’s approval. The government says these measures will enhance Pakistan’s energy security and create a more competitive refining sector.
To encourage both local and foreign investment, the policy offers safeguards against future changes in taxation, environmental regulations, and foreign exchange rules. Refineries will also be permitted to maintain foreign currency accounts to meet external debt obligations.
The policy requires all refineries to maintain crude oil reserves sufficient for 14 days of operations. Facilities processing imported crude will be required to hold an additional five-day reserve. Existing refineries seeking to benefit from the new incentives must first surrender the incentives available under the previous policy.
Before qualifying for the incentive package, refinery operators must clear any outstanding Petroleum Levy and Climate Support Levy dues. The policy also recommends avoiding punitive measures against refineries that fail to complete upgrade projects within the specified timeline.
Additionally, the government has proposed imposing a 10% regulatory duty on imported petrol and diesel to support domestic refining. To improve accountability and project execution, refineries will be required to enter into legally binding upgrade agreements with OGRA, strengthening oversight and ensuring timely implementation of modernization plans.
