Committee formed to fast-track refinery upgrade policy

KARACHI: The government on Friday ordered to speed up the implementation of a policy to upgrade local aging refineries and formed a committee to monitor the progress, officials said.

Energy Minister Muhammad Ali formed the committee to accelerate the policy implementation and asked the refineries to finalize the agreement with the government. The policy, announced in July, aims to attract investment in the refining sector and reduce the country’s dependence on imported oil products.

Industry officials said the committee, comprising representatives of the Oil and Gas Regulatory Authority (OGRA), the Petroleum Division and the refineries, will look into the mechanism of opening and operating joint escrow accounts for the upgrade projects.

“The refineries have also proposed names of four law firms to draft the agreement for the upgrade projects and asked the government to pick one,” an official said. Last week, local refineries in a letter sought finalization of the upgrade agreement.

The energy minister, Muhammad Ali, told a meeting that the government would ensure the implementation of the policy and support the refineries in their upgrade plans.

According to the policy, the joint Escrow Accounts would be operated in accordance with the terms and conditions to be specified in the Escrow Account Agreement among OGRA, the respective refinery and the National Bank of Pakistan (NBP).

Under the policy, the eligible refinery importing used plant, machinery and equipment (PME) for the upgrade project would be allowed to withdraw a maximum of 22 percent of the total project cost from the joint Escrow Account.

The refineries importing new PME for the upgrade project would be allowed to withdraw a maximum of 25 percent of the total project cost from the joint Escrow Account.

The release from the joint Escrow Account would be on a pro-rata basis, i.e., a maximum capped limit of 22 percent or 25 percent, as the case may be, from the joint Escrow Account, and the remaining from the refineries’ own resources.

OGRA will allow withdrawal of a maximum of the respective capped limit of the refinery’s upgrade project cost, determined based on the final investment decision (FID).

In case the funds deposited in the joint Escrow Account are less than the respective capped limit of the expenditure made on a milestone/deliverable and/or on the entire upgrade project basis, there will be no obligation/responsibility on the part of OGRA/government of Pakistan to meet the shortfall.

The funds from the joint Escrow Account will be available for withdrawal, post financial close of the upgrade project, against expenditure made for each milestone/deliverables of the respective refinery upgrade project. The interest accrued in the joint Escrow Account will also be used for the respective capped limit of the payment of the upgrade project from the joint Escrow Account.