ISLAMABAD: Pakistan’s long-delayed refinery modernisation programme is facing yet another setback, with upgrade agreements still awaiting finalisation despite the government’s approval of the amended policy, potentially costing the country around $1.5 billion annually in additional petroleum imports.
The agreements with Inter State Gas Systems (ISGS) were expected to be signed by the end of August, but government formalities remain incomplete, raising fresh concerns about the implementation of a refinery upgrade programme that has been under discussion since 2019.
The Brownfield Refineries Upgradation Policy, initially approved in August 2023 and amended in February 2024, was revised by the Cabinet Committee on Energy on July 28, 2026, before receiving Federal Cabinet approval on August 10. However, the policy has yet to be formally notified, reportedly due to an oversight in recording the Cabinet decision.
Industry estimates suggest that each year of delay costs Pakistan roughly $1.5 billion in foreign exchange, as the country continues to import refined petroleum products that upgraded domestic refineries could otherwise produce.
A Petroleum Division official confirmed that the policy had not yet been notified, saying the process would take more time.
The delay is also imposing a direct financial burden on refineries, which are required to surrender 2.5% of deemed duty on diesel for each day the upgrade agreements remain unsigned. Attock Refinery Limited (ARL) and National Refinery Limited (NRL) are reportedly losing around Rs7.5 million and Rs10 million per day, respectively.
ARL CEO Adil Khattak expressed concern that delays could undermine the government’s policy decisions and weaken investor confidence.
“My worry is that the forward-looking and positive decisions taken by the political and economic leadership may once again be squandered because of capacity constraints and the safe-play approach of some sections of the bureaucracy,” Khattak said.
He noted that ARL and NRL had already initialled their upgrade agreements and arranged Rs1 billion bank guarantees each in 2024, well before the earlier deadline, yet continue to bear financial penalties for delays beyond their control.
Under the original policy, upgrade agreements were to be signed with the Oil and Gas Regulatory Authority (Ogra). The revised framework transferred responsibility to ISGS, which requires coordination with the Directorate General of Oil and the Law Division, adding further procedural steps.
Khattak said the refineries had approved the final draft of the Upgradation Agreement with ISGS, despite reservations regarding certain penalty provisions and the proposed account mechanism. They are now awaiting completion of the remaining government formalities.
