Refinery upgrade plan hits snag as four plants reject terms

KARACHI: The Brownfield Refinery Policy aimed at upgrading the local refineries to produce cleaner fuels has hit a snag, as four out of five refineries have refused to sign an agreement with the oil and gas regulator, citing unfair and impractical terms, industry officials told The News on Wednesday.

The policy, which was notified on Aug. 17, 2023, offered incentives and concessions to the existing refineries to invest in upgrading their facilities to produce Euro-V compliant fuels, which have lower sulfur content and are less harmful to the environment.

The policy required the refineries to sign an upgrade agreement with the Oil & Gas Regulatory Authority (OGRA) within three months, outlining their commitments, project milestones and details.

However, only one refinery, Pakistan Refinery Limited (PRL), has executed the agreement, while the rest have raised objections to some of the clauses in the draft.

“Yes, PRL is executing the agreement,” a spokesperson of OGRA told The News. The refineries that have rejected the agreement are Pak Arab Refinery (PARCO), National Refinery Limited (NRL), Attock Refinery Limited (ATRL) and Cnyergyico.

The deadline for the refineries to sign the upgrade agreements expired on November 16, 2023, after which the fate of the refinery policy is uncertain as it may be referred to the Cabinet Committee on Energy (CCoE) again.

A top official of a local refinery, who requested anonymity, told The News that the main issues were the taxation on the funds in an escrow account of the refinery, and the arbitration and force majeure clause definition, which were not part of the policy and were not feasible financially for the refineries.

“We are determined that we wouldn’t sign the agreement until the pending issues are resolved,” the official said. He accused OGRA of distorting the policy by adding the clauses in the agreement that were not part of the policy or that killed the spirit of the policy.

“The upgradation of refineries requires a huge investment of five billion dollars and who would subscribe to the clauses in the agreements, which are not financially viable and may push the refineries to the wall in the future,” the refinery official said.

The OGRA spokesperson said the regulator had held numerous meetings with the refineries and the representatives of the Ministry of Energy, Petroleum Division,to finalize the draft of the agreement.

The final draft was shared with the refineries on Nov. 8, 2023, keeping in view the policy guidelines of the government, and that the refineries were advised to sign the agreed draft agreement within the due date.

However, some of the refineries raised objections that were found beyond the policy guidelines of the federal government, and therefore not considered.