- September 2, 2026
- Posted by: Tresmark
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Pakistan is expected to sign long-delayed upgrade agreements with five oil refineries on Thursday, potentially clearing a major hurdle for more than $6 billion in planned investment to modernise ageing facilities and increase domestic production of petrol and diesel.
The agreements involve Pak-Arab Refinery Ltd (PARCO), Pakistan Refinery Ltd (PRL), National Refinery Ltd (NRL), Cnergyico and Attock Refinery Ltd (ARL).
A senior Petroleum Division official said negotiations and finalisation of the agreements were being carried out through a series of meetings involving the Petroleum Division and Inter-State Gas Systems (ISGS).
According to the official, the parties are ready to sign the agreements, with Thursday expected to be the signing date.
The government has authorised ISGS to execute the agreements and supervise their implementation, replacing an earlier arrangement under which the Oil and Gas Regulatory Authority (OGRA) was expected to oversee the process.
Once upgraded, the refineries are expected to have greater flexibility in processing different grades and sources of crude oil. This could include Iranian and Russian crude, subject to Pakistan’s applicable laws and international sanctions.
Bankability remains key concern
Despite the expected signing, industry stakeholders have cautioned that the agreements alone will not guarantee the flow of billions of dollars in investment.
Industry representatives have raised concerns over reported changes to the incentive mechanism under the Brownfield Refinery Policy, particularly the replacement of jointly controlled escrow accounts with government-controlled accounts.
They argue that the proposed change could affect the security, control and availability of incentive funds and potentially make the projects less attractive to lenders.
Refinery modernisation requires substantial upfront capital, with financing expected from both domestic and international banks. Industry officials therefore believe that lenders must be satisfied with the contractual and financial structure before projects can reach financial close.
“Signing agreements is only the beginning,” an industry source said, stressing that the actual test would be whether lenders accept the structure, financial close is achieved and investment begins flowing into refinery upgrades.
The concerns are particularly significant because the incentive framework is considered an important component of the financial model underpinning the multibillion-dollar modernisation programme.
The Petroleum Division has yet to comment on the reported changes to the escrow mechanism despite requests for clarification.
If successfully implemented, the refinery upgrade programme could strengthen Pakistan’s domestic refining capacity, expand the range of crude that local plants can process, increase production of refined petroleum products and reduce the country’s dependence on fuel imports.
