Prime Minister Shehbaz Sharif is expected to address long-standing issues in the Brownfield Refinery Policy during Tuesday’s Cabinet Committee on Energy meeting. The decisions could determine the future of billions of dollars in refinery upgrade investments across Pakistan.
The committee will review proposed amendments to the Pakistan Oil Refining Policy for Upgradation of Existing (Brownfield) Refineries, 2023. Officials prepared the proposals after consultations with the Oil and Gas Regulatory Authority (OGRA), the Finance Division and industry stakeholders.
However, the proposed changes have raised concerns within Pakistan’s refining sector. Industry representatives warned that altering the incentive framework could discourage future investment.
Refiners Oppose Proposed Duty Reduction
The main dispute centres on a proposal to reduce deemed duty protection from 7.5% to 5%. Refinery officials argued that applying the reduction retrospectively would unfairly penalise companies for government-related delays.
According to industry representatives, all refineries accepted the draft Upgrade Agreement in 2024. They said the government never scheduled the formal signing ceremony despite repeated requests.
Industry officials maintained that administrative delays prevented the agreements from being finalised. Therefore, they argued that reducing incentives would be both unjustified and harmful to investor confidence.
The deemed duty mechanism supports refinery upgrades aimed at producing Euro-V compliant fuels. It also encourages lower furnace oil production and improves Pakistan’s overall fuel mix.
Industry Seeks Policy Stability
Refiners noted that the 7.5% tariff protection has remained unchanged for more than two decades. Consequently, they described the proposed reduction as unprecedented and damaging to planned investments.
The industry also highlighted the impact of the Finance Act 2024, which changed the sales tax treatment of petroleum products. Officials said the tax changes increased unrecoverable costs and weakened the financial viability of refinery upgrades.
Meanwhile, the Petroleum Division has proposed limited amendments to operationalise the policy while preserving its original objectives. It also recommended forming a committee to finalise the Upgrade Agreement template.
Industry representatives expressed hope that the government would retain the original incentive framework. They argued that consistent policies remain essential for attracting investment and strengthening Pakistan’s energy security.
