Petrol, diesel: Pakistan unveils new refining policy

Pakistan government has approved a new oil refining policy aimed at reducing Pakistan’s reliance on imported fuel and increasing domestic production of petrol and diesel.

The policy is expected to pave the way for around $6 billion in investment in the country’s refining sector. It was developed in consultation with relevant stakeholders, including the Special Investment Facilitation Council (SIFC).

The new framework is designed to modernise ageing refineries, increase the production of petrol and high-speed diesel, significantly reduce furnace oil output, and improve overall fuel quality.

The government believes the policy will strengthen Pakistan’s energy security. To support the production of Euro 5-compliant fuel, refineries will be offered a seven-year incentive package.

Refinery operators will also be required to sign implementation agreements with the Oil and Gas Regulatory Authority (OGRA) within 90 days of the policy’s approval.

The policy includes measures to attract international investment into Pakistan’s refining industry. It also provides protection for refineries against future changes to taxation, environmental legislation and foreign exchange regulations.

Refineries will be allowed to open foreign currency accounts to service external debt obligations. They will also be required to maintain strategic crude oil reserves equivalent to 14 days’ supply.

Refineries that rely on imported crude oil will be required to maintain an additional five-day reserve. Existing refinery operators will have to give up the previous incentive package in order to qualify for the new one.

The policy recommends that no punitive action be taken against refineries that fail to complete their upgrade projects within the prescribed timeframe. It also proposes a 10 per cent regulatory duty on imported petrol and diesel.

Before becoming eligible for the new incentive package, refineries will be required to clear any outstanding Petroleum Levy and Climate Support Levy payments.

The policy further strengthens oversight by requiring legally binding upgrade agreements with OGRA, aimed at improving monitoring, implementation and accountability across the refining sector.