KARACHI: Pakistan’s oil regulator has convened a series of meetings with local refineries this week to finalize the upgrade agreement and the escrow account agreement under the new refining policy, sources told The News on Monday.
The Oil & Gas Regulatory Authority (OGRA) has been slow in finalizing these agreements, which are required to be completed within three months of the notification of the policy on August 17, 2023, the sources said.
The local refining sector has been expressing concern over the delay in finalising these agreements on the part of OGRA, as only three weeks remain to do so under the policy, they added. “OGRA has been dragging its feet in speeding up the finalization of these agreements, which is causing concern in the local refining sector,” an industry offcial said. @Meetings have now been convened this week to finalize the agreements so that the local refineries can move forward with their upgrade plans.”
The official said that if the agreements are not finalized by the deadline, the entire process will have to be reinitiated, first requiring approval from the Economic Coordination Committee (ECC) and then from the federal cabinet.
The new refining policy was approved by the previous government in the last days of its tenure. Under the policy, a refinery and OGRA will open the requisite escrow account within three months. Until the account is opened, the incremental incentive will be deposited in the IFEM. New equipment and materials for refinery upgrades will not attract certain taxes and fees when imported.
However, to get these tax breaks, a refinery must show the equipment details to the Federal Board of Revenue (FBR) for approval after completing the initial design study for the upgrade. Additionally, to qualify for these benefits, a refinery must sign a legally binding upgrade project agreement with OGRA within three months.
This agreement will describe the output and outcome of the committed upgrade, the proposed milestones and deliverables with timelines (such as feasibility, front-end engineering design, financial close, engineering, procurement and construction contract, and commissioning), and the potential configuration (such as unit and size and tentative product slate after upgradation).
Local refineries will invest $4-4.5 billion for upgradation to make them able to produce Euro-V specification fuels and minimize the production of residual fuel (furnace oil). To be eligible for the fiscal incentives under the proposed policy, the local refinery will execute a legally binding upgrade agreement with OGRA within three months of the notification of the policy. The regulator would monitor the fund utilization process as per their committed work plan and milestones, subject to verification by one of the top four audit firms.
