March 12, 2024 [The News]- The Oil & Gas Regulatory Authority (Ogra) had sought inputs from the country’s five oil refineries on the upgrade agreements under the amended Brownfield Refinery Policy, which aims to enable them to produce cleaner fuels.

The oil regulatory body will hold a meeting with the refineries on Tuesday to discuss the progress on signing the agreements, which include setting up a joint escrow account to fund the upgrade projects.

The regulator wants to finalize the agreements with the refineries as soon as possible, as the policy had been notified by the caretaker government in August last year.

The policy was amended in October after four refineries – Pak-Arab Refinery Limited, Attock Refinery Limited, National Refinery Limited and Cnergyico Pakistan Limited – refused to sign the initial agreements, citing objections over the incentives offered.

The only refinery that signed the agreement was Pakistan Refinery Limited (PRL), which plans to upgrade its capacity to produce Euro-V compliant fuels by 2026.

The amended refinery policy enables the local refineries to produce Euro-V fuels and maximize the production of motor gasoline and diesel by minimizing the production of high sulphur furnace oil.

The policy envisages a minimum customs duty of 10 percent for 6 years from the date of notification of this policy on motor gasoline and diesel imported into the country, as well as any customs duty imposed over 10 percent and reflected in the ex-refinery price that will be deposited in the IFEM pool.

In case any refinery is not eligible to avail itself of the incentives provided in this policy, it will be bound to deposit the same in IFEM. Any customs duty on crude oil will be reimbursed to refineries through IFEM.

The notified policy also puts in place an implementation mechanism which states that for an existing refinery to be eligible for the fiscal incentives provided in this policy, it shall, within 3 months after the notification of this policy, execute a legally binding Upgrade Agreement with Ogra, which shall include: (i) the output and outcome of the committed upgrade (at least as provided in clause 6.1); (ii) the proposed milestones/deliverables with tentative timelines (including Feasibility study, FEED, Financial Close, EPC & Commissioning); (iii) the potential configuration/units/size; (iv) the tentative product slate after upgradation; and (v) a project management methodology/firm for on-time delivery, as per approved cost and specification.

The funds available in the joint Escrow Account can only be drawn and used by the respective refinery on the Upgrade Project after the payment of all outstanding government dues/petroleum levy on petroleum products.

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