Pakistan on Tuesday approved long-awaited amendments to its oil refining policy, ending years of regulatory uncertainty that industry executives say cost the country between $1.5-2 billion annually in lost foreign exchange savings, delayed investment and continued reliance on imported petroleum products.
The Cabinet Committee on Energy on Tuesday approved the amended Oil Refining Policy, paving the way for an estimated $5-6 billion in refinery upgrades aimed at producing cleaner Euro-V fuels, increasing domestic gasoline and diesel output and reducing furnace oil production.
The approval marks the culmination of a policy process that began more than six years ago. Notified on Aug. 17, 2023, the original policy was initially amended in February 2024 before another revision following extensive consultations among the government, local refineries and independent financial and legal advisers.
“The amended Oil Refining Policy was finally approved today after taking into consideration the genuine concerns of the refineries on issues that would otherwise have rendered the proposed upgradation projects unviable,” Attock Refinery Chief Executive Officer Adil Khattak said in a statement.
Khattak, who also chairs the Energy Committee of the Overseas Investors Chamber of Commerce and Industry (OICCI), said the repeated delays had come at a heavy cost to Pakistan. “Every year of delay in upgrading the local refineries was causing a loss of $1.5-2 billion to the country,” he said, attributing the losses to continued imports of refined petroleum products and delayed modernization of domestic refining capacity.
The refinery upgrades are expected to enable local plants to meet Euro-V fuel specifications, improve environmental performance and significantly increase the production of high-demand petroleum products such as gasoline and diesel. Industry officials say the projects will also reduce furnace oil production, which has become increasingly uneconomical as Pakistan’s power generation mix shifts toward coal, nuclear energy, hydropower and natural gas. Weak domestic demand for furnace oil has frequently forced refineries to lower operating rates because of storage constraints.
The policy is expected to unlock one of the country’s largest private-sector industrial investment programs, with refiners planning multi-billion-dollar expansion and modernization projects.
Pakistan currently imports substantial quantities of refined petroleum products despite having domestic refining capacity, as existing refineries produce relatively high volumes of furnace oil and lower yields of transport fuels compared with modern conversion refineries. The government believes the investment will improve energy security, reduce dependence on imported fuels and generate substantial foreign exchange savings over the longer term.
Khattak described the approval as a landmark achievement for the government despite saying the amended framework still penalizes some refineries for delays outside their control. “Though the amended policy unfairly penalizes some of the refineries for the delay, it is still an occasion to celebrate in the larger interests of the country,” he said.
He also praised Petroleum Minister Ali Pervaiz Malik and officials of the Petroleum Division for steering the policy through consultations with industry stakeholders and relevant government departments after years of negotiations.
The refining policy has faced repeated delays because of changes in successive governments, shifting fiscal policies and prolonged bureaucratic consultations, postponing investment decisions that the industry says could have strengthened Pakistan’s fuel supply chain years earlier.