SIFC sets January 7 deadline for refinery upgrade agreements under $6bn policy

The Executive Committee (EC) of the Special Investment Facilitation Council (SIFC) has set January 7, 2025, as the deadline for finalizing upgradation agreements between the Oil and Gas Regulatory Authority (OGRA) and five refineries under the Brownfield Refinery Upgradation Policy.

Sources revealed that during a recent meeting, the EC expressed concerns over delays in implementing the policy, introduced in August 2023, which aims to attract $5–6 billion in investment. The Petroleum Secretary highlighted that the exemption of sales tax on petroleum products, introduced in the 2024-25 budget, has increased project costs by $763 million, jeopardising refinery operations and making them unsustainable.

The Executive Committee directed the Petroleum Division to collaborate with the Finance Division and other stakeholders to address these challenges. A working group meeting will be convened to finalize amendments, and the Petroleum Division is expected to present a summary of required actions by January 15, 2025. 

Meanwhile, OGRA has been tasked with managing operational losses caused by the sales tax exemption through the Interim Pricing Mechanism (IFEM) while ensuring timely agreements.

Three refineries—Attock Refinery Limited (ARL), Cnergyico PK Limited, and Pakistan Refinery Limited (PRL)—have already signed upgradation agreements, joining Pakistan Refineries Limited (PRL). 

However, Pak-Arab Refinery Limited (PARCO) is still finalising its study to define the scope of its upgradation project. 

Refineries have raised concerns over the Goods and Services Tax (GST) on petroleum products, which remains a significant obstacle. They stressed that resolving this issue is crucial for securing IMF approval, as the matter is under review by the IMF mission in Islamabad.

In a joint letter to OGRA Chairman Mansoor Khan, refinery CEOs referred to prior communication with the Petroleum Division, requesting clarity on reducing deemed duty on High-Speed Diesel (HSD) under the policy. They also urged extending the deadline for signing upgradation agreements, emphasizing their commitment to investing over $6 billion in facility upgrades.

The SIFC’s EC has reiterated the urgency of finalizing these agreements to ensure the policy’s implementation and support the modernization of refineries. Despite ongoing discussions, including an SIFC meeting on October 22, 2024, unresolved issues persist. The EC stressed the need to address these challenges promptly in the national interest.