ISLAMABAD: Ministry of Energy (MoE) is reportedly preparing a new oil refining and marketing policy as $15 billion new investment is said to be waiting in the wings, well-informed sources told Business Recorder.
The issue of existing refineries is very serious as they faced financial losses of approximately Rs 50 billion during the last two years.
Refineries faced inventory losses due to rupee devaluation and then Covid-19 put additional financial pressure on them. Presently, the margins of refineries remain negative.
The government wants that refineries should upgrade themselves, which needs to be done, but for this purpose, an investment of $ 6-7 billion is required so that they can make products of Euro-V fuel.
During the visit of Saudi Crown Prince Muhammad Bin Salman, it was announced that Aramco will establish a refinery and a petrochemical plant in Pakistan with an investment of $ 10 billion. Likewise, PARCO announced it would establish a coal refinery but both have linked their investment to a new refinery policy.
The existing five refineries have capacity of 417,400 Barrels Per Day (BPD), of which Pak Arab Refinery Limited (PARCO) has 100,000 BPD oil refining capacity, Attock Refinery Limited (ARL) 53,400 BPD, Byco Petroleum Pakistan Limited (Byco) 150,000 BPD, National Refinery Limited (NRL) 64,000 BPD and Pakistan Refinery Limited 50,000 BPD.
The present refinery policy was announced and notified in 1997 and not updated during the last two decades.
“Negotiations with the government are in progress on new refinery policy. It will give protection to new investment which is necessary,” the sources continued.
An investment of $ 15 billion is envisaged through establishment of two new refineries and upgradation of existing refineries.
“Talks with government are going towards positive direction. Now there is a feeling in the government that energy security is being jeopardized in the absence of a new refinery policy,” the sources continued.
The government had prepared a policy in 2020 offering substantial incentives to the investors but the existing refineries rejected the policy and urged the government to review it. Since then refineries are getting incentives under the Refineries and Marketing Policy of 1997.
On the advice and financial difficulties of the local refineries, the Ministry of Energy (Petroleum Division) had formed a ‘Refinery Working Group’ to work out different plans for mitigating refinery losses and formulate a comprehensive policy framework for future refinery expansion and upgrade.
In the refineries policy 2020, the following incentives were offered to the refineries: new refinery projects and upgradation and expansion of existing refineries under Category A shall be exempted from the application of the Companies Profit (Workers’ Participation) Act 1968 and the Workers Welfare Fund Ordinance 1971; and exemption from all duties, taxes, surcharges and levies on import, by the refinery project, its contractors or any other person, of all machinery, vehicles, plant and equipment, other materials and spares and consumables for setting up of operation, maintenance and repair of the refinery. A number of other incentives were also offered to attract investment.