ISLAMABAD: In a major development, the Petroleum Division has sought from Cabinet Committee on Energy (CCOE) an extension in the deadline for local refineries to sign the Implementation Agreements (IAs) for their upgrade projects for another 6 months under the amended brownfield refineries’ policy 2023.
The move is aimed at accommodating the country’s two bigger refineries, Pak-Arab Refinery Company (PARCO) and Cenergyico, having over 50 percent contribution in refining output. However, the 6-month extension will delay the initiation of $5-6 billion investment for up-gradation purposes.
The earlier deadline for signing IAs was April 22, 2024 but PARCO failed to submit its upgrade project because no decision was made by its Board of Directors (BoD). The proposed extension in the deadline will enable PARCO to come up with its upgrade project after conducting its feasibility and Cenergyico to settle the dues of Rs47.5 billion in the head of Petroleum Levy with the FBR and Finance Division.
The government had earlier approved the local refineries’ up-gradation policy to ensure environment-friendly Euro-V fuels and decrease in the production of furnace oil.
To this effect, the Petroleum Division has sent a summary for the Cabinet Committee on Energy (CCoE) to accord an approval to the extension in signing Implementation Agreements (IAs) for 6 months after getting comments from Ogra, Law Division, Planning Commission and Finance Division.
However, Adil Khattak, Managing Director of Attock Refinery Limited and Chairman of Oil Companies Advisory Council (OCAC), spoke his mind saying that the deadline for signing of Up-gradation Agreements with Ogra was April 22, 2024. Three refineries namely Attock Refinery Ltd (ARL), National Refinery Ltd (NRL) and Pakistan Refinery Ltd (PRL) had given consent to sign the agreements before the deadline and two refineries PARCO and Cnergyico needed more time but the Petroleum Division didn’t arrange signing with the willing refineries nor extended the deadline date in time to accommodate PARCO’s request. It may be noted that the Refining Policy has already taken more than four years in the making, causing about $4 billion loss to the country.
“ARL, NRL and PRL plan to invest three billion dollars on their Up-gradation Projects. The total investment will go up to $6 billion when PARCO and Cnergyico join in.”
“The government seems to be more focused on attracting foreign investment, which is no doubt important but it needs to realize that foreign investment flows in only when existing foreign and local investors are listened to,” Khattak said.
As per the summary that is sent to CCOE, under the amended policy, PARCO is in process of updating its feasibility study after which PARCO board of directors will take decision on the planned up-gradation. The said activities may take 5-6 months. Similarly, a settlement agreement between Cenergyico Pakistan Limited (CPL) and the government for payment of outstanding petroleum levy is also being negotiated which many not be concluded before April 22, 2024. In case of signing by due date, the prevailing deemed duty on HSD shall be reduced from 7.5 percent to 5 percent for PARCO and Cenergyico making operation of these refineries’ extremely challenging.
The sitting regime wants PARCO to become part of up-gradation policy at all costs as without PARCO, the policy will not yield the required dividends as PARCO’s contribution in refining out stands at 44 percent alone. Keeping in view the sensitivity of the issue, the government has decided to contact CEO Mubadala and the UAE energy minister to persuade them to give a go-ahead to BoD of PARCO.