Monday June 24, 2024

Oil sector alarmed at delay in local investment accords

By Tanveer Malik
June 07, 2024
Working oil pumpjacks are pictured on the outskirts of Taft, Kern County, California on September 21, 2023. — AFP
Working oil pumpjacks are pictured on the outskirts of Taft, Kern County, California on September 21, 2023. — AFP

KARACHI: Pakistan’s oil industry is in a fix believing a spanner has been thrown in the works regarding critical agreements for local investment, holding off the direly needed upgrade of the sector, The News learnt on Thursday.

"The government is talking about bringing in foreign investment in the energy sector, but has been ignoring the local investment, which is ready to be put in immediately once the government finalised its policy” the people in the oil sector said.

They cited the delay in investment from the local sector as a glaring example, particularly the unnecessary postponement in finalising agreements with the local refining sector.

“This sector is ready to invest $4-5 billion in upgrading refineries. However, the government has not facilitated this process, as the upgrade agreements have been stalled after the government decided to extend the signing timeframe by six months."

The oil sector officials said that the government had been talking about foreign investment especially from Saudi oil giant Aramco to set up an integrated refinery for the last several months.“The arrival of this foreign investment and the establishment of the refinery remain a distant dream. This enormous project, involving an investment of over $10 billion, will require intense hard work and a long time to complete,” they said.

However, local refineries were ready to invest immediately and waiting for upgradation agreements with the Oil & Gas Regulatory Authority (OGRA), they said and added that a $3 billion investment was ready to be made as three refineries had forwarded the upgradation agreements to government, however, those were yet to be signed.

Adil Khattak, Chairman Oil Companies Advisory Council (OCAC) confided to The News that the refining sector was worried about the delay in signing upgrade agreements. “Pakistan Refinery Limited, National Refinery Limited and Attock Refinery Limited are ready to sign the upgrade agreements. “However, due to issues on the part of Pak Arab Refinery and Cnergyico Refinery, the agreements have been kept on hold.”He said that on April 22, 2024, the energy ministry proposed to the Cabinet Committee on Energy to extend the upgrade agreements for six months but to no avail and the Committee had not met since.

“It is beyond comprehension as to why the government is not ready to sign upgrade agreements with three refineries when these are ready to sign.

“I’ve repeatedly requested the government to sign upgrade agreements with three refineries, however, all these efforts have proved fruitless so far.”The Brownfield Refinery Policy enables the local refineries to produce Euro-Vfuels and maximise the production of motor gasoline and diesel by minimising the production of high-sulphur furnace oil after upgradation.

The policy envisages a minimum customs duty of 10 per cent 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 per cent and reflected in the ex-refinery price that will be deposited in the IFEM pool.