Karachi May 24 2024: Cnergyico PK Limited, Pakistan’s largest refinery, has commenced a refinery upgrade project valued at over $1 billion, as disclosed by company management during an analyst briefing.
This upgrade will notably boost the production of High-Speed Diesel (HSD) and Premier Motor Gasoline (PMG) while reducing the output of Furnace Oil (FO). Additionally, all products will comply with Euro V standards.
Following the upgrade, the share of PMG will rise from 23 percent to 33.3 percent, and HSD’s share will increase from 45 percent to 48 percent. Significantly, the share of FO in the production slate will drop from the current 26 percent to 9.3 percent.
The “Pakistan Oil Refining Policy for Upgradation of Existing/Brownfield Refineries 2023,” approved in August 2023, outlines the guidelines for this upgrade.
An amended refinery policy was notified by the government on February 23, 2024, with the following key points:
i. Project completion timeline is set at 6 years.
ii. The incentive collection period has been extended from 6 to 7 years.
iii. The current 7.5% deemed duty on HSD will continue after the 7-year incentive period for up to 20 years or until deregulation, whichever comes first.
iv. The maximum withdrawal limit from the escrow account for eligible refineries importing used plant and machinery has been increased from 22% to 24.5%.
v. A force majeure clause has been included.
vi. The arbitration clause has been improved.
After thorough discussions, the company has agreed on a draft of the Upgrade Agreement with the Oil & Gas Regulatory Authority (OGRA) and is awaiting further instructions from OGRA.
