A Chinese investment corporation has committed $1 billion to Pakistan Refinery Limited (PRL) for a major upgrade aimed at doubling its production capacity. The agreement, however, comes with a condition: the Chinese firm seeks full independence from government control, ensuring that PRL repays the investment in dollars without any government intervention.
Currently, Pakistan’s State Bank allows the private sector, including refineries, to retain dollars for investment. However, the Chinese company has urged for the removal of such controls to facilitate the smooth repayment of the loan. The firm emphasized that there should be no hurdles in remitting dollars back to China.
To address these concerns, PRL has assured the Chinese investors that it will generate sufficient dollars through the export of petroleum products to meet its repayment obligations. China Export & Credit Insurance Corporation (SINOSURE), a state-funded entity promoting China’s foreign trade, has also insisted on keeping government interference out of the deal.
The PRL upgrade will increase the refinery’s output from 50,000 to 100,000 barrels per day, transforming its hydro-skimming process to deep-conversion. This modernization will enable PRL to produce Euro 5-compliant diesel and petrol, while phasing out furnace oil, which has been generating losses.
The refinery currently produces 250,000 tonnes of motor spirit annually, which is expected to rise to 1.5 million tonnes post-upgrade. High-speed diesel production will also increase from 600,000 tonnes to 2 million tonnes per year.
PRL’s partnership with China’s United Energy Group (UEG) was formalized through a memorandum of understanding (MoU) signed in October 2023, marking the start of this strategic collaboration in Pakistan’s energy sector.
The project is a key part of Pakistan’s broader effort to modernize its refining sector. PRL has also signed licensing agreements with global companies Honeywell UOP and Axens to produce Euro 5-standard gasoline and diesel. In parallel, PRL and other refineries are in talks to finalize agreements with Pakistan’s Oil and Gas Regulatory Authority (OGRA) under the revised refinery policy.
The upgrade is part of a larger industry-wide initiative, with three refineries—Attock Refinery Limited (ARL), National Refinery Limited (NRL), and PRL—planning a combined $3 billion investment. Once other players like Pak Arab Refinery (Parco) and Cnergyico PK join, the total investment will reach $6 billion.
The government’s updated “Pakistan Oil Refining Policy for Up-gradation of Existing/Brownfield Refineries 2023” offers financial incentives, including a 2.5% additional incentive on high-speed diesel and a 10% deemed duty on petrol for seven years, to support the production of Euro 5 fuels while reducing furnace oil output. These funds, managed by OGRA, will help cover up to 27.5% of plant upgrade costs after achieving financial close.
Story by Zafar Bhutta
