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Refiners say policy limbo puts $5bn upgrade at stake

April 19, 2022

ISLAMABAD: Refineries on Monday appealed to the government to approve the draft of refining policy, up in the air for over two years, fearing this delay might jeopardise industry's $4-5 billion upgrade plans and $8-10 billion investment in the greenfield projects.

Country’s oil refiners have also asked the government to consider their proposal submitted with Ministry of Energy in February for running furnace oil (FO) fired power plants having near 1,500MW or equivalent generation capacity on regular basis, as per an Attock Refinery Limited (ARL) letter dated April 15, 2022 to Secretary Petroleum.

Refineries, in the letter written with the subject ‘Refineries role in averting products availability crisis’ pleaded that this proposal would help avert the recurrence of petroleum products’ scarcity and glut of FO because of ullage issue that happens almost every year.

“This proposal along with approval of new Refining Policy will allow the existing refineries to upgrade and expand their respective units to produce Euro-V compliant fuels with increased production.”

Refineries also called on the secretary petroleum to convene a meeting to discuss the proposal at the earliest. They argued that in order to avoid recurrence of such situations, a permanent solution was critically important to enable maximum utilisation and sustainability of the sector and to ensure availability of petroleum products to the maximum possible extent.

The letter also referred to the meeting, chaired by secretary petroleum and attended by chairman OGRA and refineries officials on March 31, 2022, wherein directions were given to all refineries to enhance their production to meet the growing demand of petroleum products in the country, especially FO and diesel.

During the meeting, it was assured that despite serious challenges being confronted by the sector, the refineries would certainly endeavor to enhance their respective throughputs, especially maximisation of FO production, keeping in view problems in sourcing LNG supplies from the international markets.

The letter also asked the petroleum secretary to recall that a few months back (December 2021-January 2022, refineries were struggling to operate due to high stocks of FO owing to little or no consumption in the power sector.

Some of the refineries even had to shut down their operations because of ullage problems and some had to export FO at substantial financial losses.

The growing demand of petroleum products in the country coupled with changing geopolitical situation necessitates the need for having a modern and vibrant refining sector in Pakistan to ensure its energy security, refineries also said.

It must be noted that the then SAPM on Energy Draft, had almost finalised the refining policy draft, but the government did not give a green-signal because of the disputed tax holiday. According to the draft, the new policy seeks extension up to December 31, 2022, for availing tax holiday under clause 126B of Finance Act 2021-22, to obtain government approval for setting up new deep conversion refineries from existing deadline of December 31, 2021.

The new policy also says there shall be no duties and sales tax on import of crude oil, being the main raw material of refineries, from July 1, 2022.

In August 2021, the energy ministry submitted a new Refinery Policy to ECC (Economic Coordination Committee) of the Cabinet.

Now the newly-formed cabinet will discuss the policy and according to sources Mr Miftah Ismail already has the document about the refining policy to study. —

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