Islamabad:
The Cabinet Committee on Energy (CCOE) is scheduled to meet on Thursday, where it will consider extending the deadline for signing implementation agreements with refiners to upgrade their plants.
Prime Minister Shehbaz Sharif will preside over the meeting. According to sources, the CCOE will consider three agenda items, including the February 2024 debt circular, an incentive mechanism to recover electricity arrears of more than two years and extension of the deadline for signing upgrade agreements plants under the Pakistan Oil Refining Policy for Upgrading Existing/Brownfield Refineries 2023.
The Directorate of Petroleum has submitted a brief for an extension to the CCOE approval deadline.
Earlier, the deadline for signing agreements with the Oil and Gas Regulatory Authority (Ogra) was April 22, 2024.
Three refineries, Attock Refinery Limited (ARL), National Refinery Limited (NRL) and Pakistan Refinery Limited (PRL) agreed to sign implementation agreements before the deadline, while two refiners – Pak Arab Refinery (Parco) and Cnergyico PK – they needed more time.
However, the Petroleum Directorate neither arranged for the signing of agreements with the willing refiners nor extended the date to accommodate the request of others.
The formulation of a new refining policy has already taken more than four years. ARL, NRL and PRL plan to invest $3 billion to upgrade their plants, and the total investment will reach $6 billion when Parco and Cnergyico join.
The amended “Pakistan Petroleum Refining Policy for Upgradation of Existing Refineries 2023” has already been notified for implementation.
The policy envisages upgradation of existing refineries to produce eco-friendly Euro-V fuel and reduction in furnace oil production.
To achieve this, the policy provides 2.5% additional incentive on High Speed Diesel (HSD), in addition to the current 7.5% and 10% on motor alcohol (petrol) in the form of accounting duty for seven years .
The proposed duty will be deposited into an escrow account maintained by Ogra at the refineries to cover the cost of up to 27.5% of facility upgrades. Ogra will enable refineries to withdraw funds from the escrow account, post-financial closeout of upgrade projects and cover the costs incurred to achieve each milestone.
To avail the incremental incentive, refineries are required to sign facility upgrade agreements, open an escrow account and provide a bank guarantee of Rs 1 billion to Ogra.
Published in The Express Tribune, May 16u2024.
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