ISLAMABAD – Pakistan is expected to sign long-awaited agreements with five major oil refineries on Thursday (tomorrow), paving the way for more than $6 billion in investment aimed at upgrading ageing plants, increasing domestic production of petroleum products and reducing the country’s dependence on fuel imports.
The agreements involve Pak-Arab Refinery Company (PARCO), Pakistan Refinery Limited (PRL), National Refinery Limited (NRL), Cnergyico and Attock Refinery Limited (ARL).
A senior official said the Petroleum Division and Inter-State Gas Systems (ISGS) have been holding a series of meetings to finalise the arrangements ahead of the signing.
The government has authorised ISGS to execute the agreements and supervise their implementation. The responsibility was previously expected to be handled by the Oil and Gas Regulatory Authority (OGRA).
The proposed refinery modernisation programme is being pursued under the government’s Brownfield Refinery Policy, which aims to encourage investment in existing refineries and improve their production capacity and efficiency.
Officials said the upgraded refineries would have greater flexibility in processing different types of crude oil. This could include crude from Iran and Russia, subject to Pakistan’s laws, regulatory requirements and applicable international sanctions.
However, industry stakeholders have raised concerns that signing the agreements alone will not guarantee the flow of the promised investment. They have stressed that the projects must have a financially viable structure capable of securing funding from lenders.
Industry representatives have particularly questioned a reported move to replace jointly controlled escrow accounts for refinery incentives with government-controlled accounts. They argue that the proposed change could affect the security, control and accessibility of funds and potentially make the projects less attractive to banks and investors.
The refinery upgrades require substantial capital expenditure and are expected to depend significantly on financing from domestic and international lenders.
The industry sources said the real test would come after the agreements are signed, when the companies seek financing and attempt to achieve financial close.
They maintained that investment would only materialise if lenders consider the contractual and financial arrangements sufficiently secure and commercially viable.
The government has yet to publicly clarify the reported changes to the escrow mechanism or their potential impact on the refinery upgrade programme.
