Three refineries set to ink upgrade deals under new policy

KARACHI: Three refineries - Attock Refinery Limited, National Refinery Limited, and Pakistan Refinery Limited - are poised to sign upgrade agreements under the newly amended Brownfield Refinery Policy, an official communique showed on Thursday.

"Pursuant to the Cabinet Committee on Energy's decision and the legal opinion of M/s. Ajuris for assistance in resolving the outstanding issues of refineries, OGRA, in consultation with the refineries, developed the templates of the Upgrade Agreement as well as the Escrow Account Agreement in line with the amended Policy and the Ajuris Report," the Oil & Gas Regulatory Authority (OGRA), in a letter to Ministry of Energy Petroleum Division (MEPD), said.

The letter stated that the templates were circulated to ARL, NRL, PARCO, and Byco, whereas PRL was advised to develop its supplement to the upgrade agreement pursuant to clause 7.3 of the subject policy.

OGRA reported that ARL, NRL, and PRL have conveyed their position that they are ready to sign the upgrade agreements and stated that MEPD may, therefore, proceed further to coordinate the signing ceremony of the same.

However, "PARCO has not submitted details of its upgrade project, which shall become an integral part of the upgrade agreement, whereas the status of Byco with respect to clause 6.1.3.2 is awaited from MEPD".

As three refineries are ready to sign upgrade agreements, PARCO's foreign partner is still contemplating signing the upgrade agreement, and its board has sought time before giving any final decision on the upgrade agreement.

PARCO is a joint venture between the governments of Pakistan and Abu Dhabi, and its foreign partner wants to invest in the production of Euro V-standard petrol and diesel and continues to produce furnace oil.

The case of Byco, now Cnergyico, depends on the settlement of Rs47.5 billion, which it defaulted to the government for the last many years when it didn't deposit the petroleum levy on petroleum products.

The refinery submitted a settlement plan for this huge amount; however, it has not been approved yet as the government’s departments didn't agree with it.The amended refinery policy enables the local refineries to produce Euro-V fuels and maximize the production of motor gasoline and diesel by minimizing the production of high sulphur furnace oil.

The policy envisages a minimum customs duty of 10 percent for 6 years from the date of notification of this policy on motor gasoline and diesel imported into the country, as well as any customs duty imposed over 10 percent and reflected in the ex-refinery price that will be deposited in the IFEM pool.

In case any refinery is not eligible to avail itself of the incentives provided in this policy, it will be bound to deposit the same in IFEM. Any customs duty on crude oil will be reimbursed to refineries through IFEM.