The oil refining sector sees $1 billion in investment

Oil refinery. PHOTO: AFP

Islamabad:

Cnergyico Pk Limited, the country’s largest refiner, is eyeing more than $1 billion in investment following the introduction of a new government policy aimed at boosting the industry.

Following its investment, Cnergyico plans to boost production of Euro-V compliant high-speed gasoline and diesel while reducing furnace oil production in response to declining and unpredictable demand.

Pakistan has faced several economic challenges in recent times, including political instability, soaring inflation, a weakening currency and dwindling foreign exchange reserves. These factors have eroded investor confidence, making local and foreign investors reluctant to commit capital to major projects.

In a move to counter these trends, the government recently announced the Brownfield Oil Refinery Policy. This initiative, aimed at boosting investment in existing projects, follows the earlier introduction of the Greenfield Refinery Policy, which sought to attract foreign investment in the sector.

While foreign investors have yet to commit to building new facilities, the Brownfield policy has sparked interest among the top five domestic refiners: Cnergyico, Attock Refinery Limited (ARL), Pakistan Refinery Limited (PRL), National Refinery Limited (NRL) and Pak Arab Refinery Limited (PARCO).

Cnergyico recently announced plans to invest over $1 billion in modernizing and expanding its oil refining operations. The company’s oil refining complex, capable of processing up to 156,000 barrels of crude oil per day, constitutes about 37% of Pakistan’s total oil refining capacity.

Speaking to The Express Tribune, a Cnergyico spokesperson welcomed the new policy, saying, “This will lead to the revival of Pakistan’s oil refining industry, leading to a significant increase in the production of environmentally friendly fuels, reduced dependence on imported fuels, significant savings foreign exchange, job creation and a boost to overall business activity”.

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PRL launches $1.7bn refinery upgrade project

Cnergyico is actively engaged in discussions with the government to address delays in oil levy payments, a situation exacerbated by the difficult economic climate that has affected the entire oil refining industry, alongside delays in claims from state-controlled entities. The company’s outstanding claims from these entities currently exceed the amount owed to the government for oil levy.

“We are fully committed to resolving this issue at the earliest, in accordance with approved oil refining policy,” the spokesman said.

Besides Cnergyico, PRL is also looking to upgrade its plants and double its processing capacity to 100,000 barrels per day by spending $1.7 billion. PRL, a subsidiary of PSO, expects to complete the project by the end of 2028. In total, the five oil refineries across Pakistan are set to invest between $5 billion and $6 billion to modernize their facilities.

These upgrades could potentially double Pakistan’s gasoline production and increase diesel output by 47 percent, while furnace oil could see a 78 percent drop. Such developments could lead Pakistan to diesel self-sufficiency, reducing the need for costly imports that weigh on the country’s finances.

Published in The Express Tribune, February 28^u2024.

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