Govt to penalise refineries failing to sign UAs by Oct 1

ISLAMABAD: The federal government has decided to impose financial penalties on oil refineries that fail to execute Upgradation Agreements (UAs) with the Ministry of Energy (Petroleum Division) by October 1, 2026, well-informed sources in the Petroleum Division told Business Recorder. The decision was taken by the Federal Cabinet during a recent meeting while considering the Cabinet Committee on Energy (CCoE) decision titled “Amendments of Pakistan Oil Refining Policy for Upgradation of Existing Brownfield Refineries, 2023. ” During the discussion, the Petroleum Division apprised the Cabinet that the key objectives of the amended oil refining policy were to produce Euro-V compliant petrol and diesel, enhance petrol and diesel production capacity, and minimise furnace oil and other lower-value products. READ MORE: Pakistan refineries set to ink $6bn upgrade deals The Cabinet was further informed that the upgradation of refineries was expected to generate annual foreign exchange savings of approximately USD1 billion. The amended policy would also help attract much-needed foreign investment into Pakistan’s refining sector, particularly as the Kingdom of Saudi Arabia had already expressed keen interest in investing in the country’s refinery sector. In response to a query, the Petroleum Division clarified that the amendments directed by the CCoE at its meeting on July 28, 2026, had been incorporated into the final draft of the amended Pakistan Oil Refining Policy for Upgradation of Existing Brownfield Refineries, 2023. The Petroleum Division also informed the Cabinet that the role of independent third-party consultants had been further elaborated to ensure independent certification. Checks had also been incorporated to ensure that any defaulting refinery, or a refinery lagging behind in the physical progress of its upgrade project, would not be able to avail incentives until corrective measures were taken. After discussion, the Federal Cabinet ratified the CCoE decision with the following stipulations: (i) Refineries shall sign upgrade agreements with the Ministry of Energy (Petroleum Division), instead of OGRA, within 45 days rather than 60 days; (ii) incremental incentives shall be deposited into the Refinery Upgradation Account maintained by the Petroleum Division instead of escrow accounts with OGRA; (iii) policy implementation and monitoring functions shall be transferred from OGRA to the Petroleum Division; (iv) if an upgrade project is operationalised within three years, the refinery may avail an additional incentive equivalent to 0. 5 percent of the capped limit for every year saved; (v) the upgrade project completion timeline shall be reduced to five years plus a one-year cure period, with a one percent reduction in incentive; (vi) the federal government may consider an extension of one year beyond the cure period, subject to justification; (vii) Licences of refineries that fail to commission upgraded projects within the specified timeline, with a maximum period of 5+1 years, shall be liable to be revoked by the competent authority; (viii) Refineries that fail to execute UAs by October 1, 2026, shall deposit the deemed duty above 5 percent on HSD into the Refinery Upgradation Account, starting from the date of signing of the UA, with the transfer to be completed by June 30, 2027; (ix) Deemed duty on HSD shall be reduced to 2. 5 percent for refineries that do sign the UA by October 1, 2026, and further reduced to zero by November 15, 2026; (x) No international arbitration shall be allowed without Cabinet approval; and (xi) Missing definitions shall be added to the policy to ensure unambiguous interpretation. Meanwhile, on August 26, 2026, Minister for Petroleum and Natural Resources Ali Pervaiz Malik held meetings with the managements of Pakistan’s five oil refineries—Pak-Arab Refinery Limited (PARCO), Pakistan Refinery Limited (PRL), National Refinery Limited (NRL), Cnergyico and Attock Refinery Limited (ARL)—to review progress on implementation of the Brownfield Refinery Upgradation Policy, the financial and operational performance of the refineries, and measures to strengthen Pakistan’s energy security. According to the Petroleum Division, the managements of all five refineries reaffirmed their readiness to sign agreements under the Refinery Upgradation Policy, with the agreements expected to be signed early next month. The agreements are expected to unlock approximately USD6 billion in investment in Pakistan’s refining sector. However, when contacted a senior executive of one of the refineries said that amendments in Pakistan Oil Refining Policy for Upgradation of Existing Brownfield Refineries, 2023 has not yet been notified, adding that as the revised policy is notified, refineries are to sign agreements with the Petroleum Division within 45 days. Copyright Business Recorder, 2026

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