The Cabinet Committee on Energy (CCOE) is scheduled to meet on Thursday where it will consider an extension in deadline for signing implementation agreements with refineries for upgrading their plants.

Prime Minister Shehbaz Sharif will chair the meeting. According to sources, the CCOE will take up three agenda items including the circular debt report for February 2024, an incentive mechanism for the recovery of electricity arrears of more than two years and the extension in deadline for signing plant upgrade agreements under the Pakistan Oil Refining Policy for Up-gradation of Existing/Brownfield Refineries 2023.

The Petroleum Division has submitted a summary for extension in the deadline for approval of the CCOE.

Earlier, the deadline for signing agreements with the Oil and Gas Regulatory Authority (Ogra) was April 22, 2024.

Three refineries namely Attock Refinery Limited (ARL), National Refinery Limited (NRL) and Pakistan Refinery Limited (PRL) had agreed to ink implementation agreements before the deadline while two refineries – Pak Arab Refinery (Parco) and Cnergyico PK – needed more time.

However, the Petroleum Division neither arranged the signing of agreements with the willing refineries 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 in upgrading their plants while total investment will reach $6 billion when Parco and Cnergyico also join them.

The amended “Pakistan Oil Refining Policy for Up-gradation of Existing/Brownfield Refineries 2023” has already been notified for implementation.

The policy envisages the upgrading of existing refineries to produce environmentally friendly Euro-V fuels and reduce the output of furnace oil.

To achieve this objective, the policy provides a 2.5% incremental incentive on high-speed diesel (HSD), in addition to the current 7.5%, and 10% on motor spirit (petrol) in the form of deemed duty for seven years.

The deemed duty will be deposited in an escrow account maintained by Ogra with the refineries for meeting up to 27.5% cost of plant upgrades. Ogra will allow the withdrawal of funds by the refineries from the escrow account, post-financial close of upgrade projects and for meeting the expenditure made to achieve each milestone.

To avail themselves of the incremental incentive, the refineries are required to execute plant upgrade agreements, open an escrow account and provide a Rs1 billion bank guarantee to Ogra.

Published in The Express Tribune, May 16^th, 2024.

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