Pakistan's Refining Sector to Unlock US$6 Billion in Investment

Written by Martin Lynch, European News Editor for IIR News Intelligence (Sugar Land, Texas)

Summary

Pakistan's government is moving closer to signing deals with the country's main refineries that will unlock up to US$6 billion in investment.

Modernization Plan

The government of Pakistan is looking to ink agreements with the operators of the country's five key refineries in the coming weeks that will unlock an estimated US$6 billion in investment. 

Pakistan's Federal Minister for Petroleum, Ali Pervaiz Malik,has met with representatives of the key refineries, Pak Arab Refinery Limited (PARCO), Pakistan Refinery Limited (PRL), National Refinery Limited (NRL), Cynergico and Attock Refinery Limited (ARL), to hammer out the final draft of its Refinery Upgradation Policy. The policy is a long-delayed modernization program designed to reduce the country's dependence on imported petroleum products by increasing the ability of domestic refineries to produce cleaner fuels. A deal was meant to be signed last week but has been delayed. In recent weeks, the Petroleum Ministry stated that all of the refineries were ready to sign agreements in early September with the planned upgrades expected to attract in excess of US$6 billion in investment. According to Industrial Info Resources data, there are 88 refining projects in Pakistan worth more than US$14.5 billion in investment. 

The Government Plan

Malik highlighted that refinery upgradation "is essential for long term sustainability of the country's refining sector." The planned upgrades would enable refineries to produce Euro-5 compliant fuel products in Pakistan for the first time. Inter State Gas Systems (ISGS) was formed in August by the state to oversee the implementation of the policy - from deal signing to project monitoring and accounting -  on behalf of the Petroleum Ministry. Malik said: "Producing these products domestically would help reduce reliance on imported petrol and diesel and could also help bring down their price compared to imported products". He stressed that the timely signing of the agreements was "imperative for taking forward the upgradation programme," promising that the government would "continue to facilitate the refineries in addressing any issues related to implementation of the policy." He added that the ongoing regional situation arising from the US-Iran conflict has further highlighted "the urgency of reducing reliance on external supply chains and ensuring maximum domestic refining flexibility/capability."

Delays Will be Penalized

It is understood that the government has agreed, behind closed doors, to impose financial penalties on refineries that fail to sign the Upgradation Agreements (UAs) with the Petroleum Ministry by October 1, 2026. Quoting sources in the Ministry, Business Recorder reported that that refineries failing to execute UAs by October 1, 2026, would have to deposit the duty above 5% on high-speed diesel (HSD) into the Refinery Upgradation Account while those signing by October 1 will pay a lower duty on HSD of 2.5%, before it is phased out completely by November 15, 2026.

External Investment Needed

Speaking to Arab News, PRL Chief Executive Officer Mohsin Ali Mangi said the scale of the planned investments will require external investment because Pakistan's domestic capital markets and banks lacked the capacity for projects of this size. "Most investments will be foreign as there is no appetite in the local stocks exchange to generate equity. Nor is there any appetite in the banking sector. PRL is expecting to invest about $1.9 billion after completing front-end engineering and design. 

Key Takeaways

• Pakistan is hoping to unlock up to US$6 billion in investment in its refineries following final meetings with key players. 
• A long-delayed modernization program will increase domestic refineries to produce cleaner fuels and reduce the country's dependence on imported petroleum products.
• Industrial Info Resources is tracking 88 refining projects in Pakistan worth more than US$14.5 billion in investment. 

About Industrial Info Resources

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, Industrial Info Resources is tracking over 250,000 current and future projects worth $30.2 Trillion (USD).