ISLAMABAD: The Oil and Gas Regulatory Authority (Ogra) and Pakistan Refinery Ltd (PRL) on Thursday signed the first agreement under the revised Brownfield Refinery Policy 2023 announced in August to upgrade and enhance refining capacity for production of better quality fuels.

The Brownfield Refinery Policy, a critical component of the national strategic framework, necessitated these agreements to facilitate existing refineries in advancing their projects towards producing Euro-5-compliant fuels. The implementation of this policy is poised to usher in positive transformations within the oil sector of Pakistan, Ogra said in a statement.

Under the policy, the refineries were required to enter into a binding agreement with Ogra for expansion of capacity and improvement in quality products within three months after the notification. So far, PRL is the only refinery and that too in the public sector to sign a formal agreement.

However, Ogra said the final agreed draft of the agreement was shared with the refineries on Nov 8 keeping in view the policy guidelines of the federal government for execution, as the refineries had to sign the agreement with it.

“However, some of the refineries have raised certain objections which are found beyond the policy guidelines of the federal government, therefore, not considered and the same has been raised with the federal government,” Ogra said, adding the refineries had been advised to sign the agreed draft agreement within the due date.

Signs first pact under Brownfield Policy with Ogra

“The upgrade projects under the Brownfield Refinery Policy are of paramount national importance and this agreement with PRL signifies the initiation of a series of strategic partnerships to enhance our refining capabilities and contribute to the production of environmentally friendly fuels,” Ogra chairman Masroor Khan was quoted as saying. He hoped the process would lead to an increase in the local production of Euro-5-compliant petrol and diesel and reduce import burden and foreign exchange loss.

Under the brownfield refining policy, local refineries have to upgrade themselves by signing the agreement or would have to close down gradually.

The federal cabinet had capped the utilisation of funds to be collected from tariff protection at 22pc and 25pc for the import of used and new refining equipment respectively for maximisation of local petrol and diesel production and no refinery would be allowed to produce or market products below Euro-5 standard.

Under the policy, there shall be a minimum customs duty of 10pc for six years on petrol and diesel imported. Any customs duty imposed over 10pc and reflected in the ex-refinery price will be deposited in the Inland Freight Equalization Margin (IFEM).

The “refineries shall be allowed 10pc tariff protection/deemed duty applicable on motor gasoline (petrol) and diesel’s ex-refinery price for six years from the date of notification of the refining policy and opening of the joint Escrow account with Ogra. However, 2.5pc of the deemed duty on diesel and 10pc of petrol (incremental incentive) shall be deposited by refineries in the Escrow Account”.

These incentives would have an estimated per litre additional cost impact of Rs5.64 and Rs3.07 in petrol and diesel, respectively.

Published in Dawn, November 17th, 2023