ISLAMABAD: The Cabinet Committee on Energy (CCOE) has decided to engage with the United Arab Emirates (UAE) regarding a planned $1.3 billion investment in Pak Arab Refinery Limited (PARCO). The investment aims to establish a hydrocracker unit to convert furnace oil into petrol and diesel.
During a recent CCOE meeting, economic managers emphasized the importance of sending a delegation to the UAE for consultation. They also discussed extending the deadline for refineries to sign agreements for upgrading their plants under the new refinery policy.
Three refineries—Attock Refinery Limited, National Refinery Limited, and Pakistan Refinery Limited—are prepared to sign such agreements. Following these preparations, a delegation will visit the UAE for further discussions.
PARCO is updating its feasibility study, after which its board of directors will decide on the plant upgrade. This process is expected to take five to six months. Meanwhile, negotiations between Cnergyico PK and the government of Pakistan are underway to settle outstanding petroleum levies.
As a joint venture between the governments of Pakistan and the UAE, PARCO has been operating at maximum capacity, despite issues like diesel smuggling into Pakistan. The government’s timely action against smuggling has increased demand for petroleum products.
PARCO, which accounts for nearly 50% of Pakistan’s refining capacity, is crucial for the economy, saving significant foreign exchange. The energy ministry and the Special Investment Facilitation Council (SIFC) support PARCO’s full-capacity operations.
However, the recent budget announcement has raised concerns in the oil refining industry. The government’s shift from a zero-rating status to a sales tax exemption may negatively impact business and plant upgrade projects if not addressed promptly.
The Petroleum Division briefed the CCOE on the amendments to the “Pakistan Oil Refining Policy for Up-gradation of Existing/Brownfield Refineries 2023,” which the federal cabinet ratified. The policy aims to upgrade refineries to produce environmentally friendly Euro-V fuels and reduce furnace oil output. Incentives include an incremental duty of 2.5% on high-speed diesel and 10% on motor spirit (petrol) in the form of deemed duty for seven years.
Refineries must sign upgrade agreements, open an escrow account, and provide a Rs1 billion bank guarantee to Ogra by April 22, 2024. The CCOE has approved a six-month extension for these deadlines, effective from April 22, 2024.
Story by Zafar Bhutta
