August 19, 2026
By Urdu Report Editorial Team
Pakistan has cleared the way for one of the country’s largest industrial investment drives in decades in the energy sector, with amendments to the refining policy expected to unlock between $4.5 billion and $6 billion in investment for the modernization of five domestic refineries.
The Cabinet Committee on Energy (CCOE), chaired by Prime Minister Shehbaz Sharif, approved amendments to the Pakistan Oil Refining Policy 2023. The revised policy is designed to increase petrol and diesel production, promote Euro-V fuel standards, reduce furnace oil output and strengthen Pakistan’s energy security.
The government expects the refinery upgrades to reduce the country’s reliance on imported refined petroleum products and increase the amount of crude oil processed domestically.
Officials estimate that delays in refinery modernization have been costing Pakistan between $1.5 billion and $2 billion annually. The Petroleum Division has also been tasked with conducting roadshows in Gulf markets, including Qatar and Saudi Arabia, to attract foreign investment.
Five Refineries Set for Major Upgrades
The modernization plans of Pakistan’s five major refineries — Pak-Arab Refinery Company (PARCO), Pakistan Refinery Limited (PRL), Cnergyico Pakistan Limited (CPL), Attock Refinery Limited (ARL) and National Refinery Limited (NRL) — represent a potential investment of around $4.5 billion to $5 billion in the country’s refining industry.
Cnergyico Pakistan Limited, the country’s largest private refinery, is pursuing a three-phase investment program worth around $1.2 billion. The plan includes green fuel production, a Bottom of the Barrel upgrade, capacity expansion and a new single-point mooring facility.
The refinery currently has a capacity of around 156,000 barrels per day and aims to increase it to approximately 200,000 barrels per day. Its first phase, aimed at achieving Euro-5 and Euro-6 fuel standards, is already underway.
Pakistan Refinery Limited is reportedly preparing one of the largest projects in the sector, involving a $1.8 billion to $2 billion Bottom of the Barrel upgrade. The project could nearly double its crude oil processing capacity.
PARCO, a joint venture between Pakistan and the UAE, has selected a $600 million green fuel project after reviewing two upgrade studies. The refinery plans to move completely from Euro-3 to Euro-5 fuel standards. It has already reduced its furnace oil production and ultimately aims to eliminate furnace oil production altogether.
National Refinery Limited has already achieved Euro-5 high-speed diesel production and is considering increasing its crude processing capacity from 50,000 to 70,000 barrels per day. However, the final upgrade design is still being finalized.
Industry observers say the upgrades will transform the facilities into deep-conversion refineries capable of processing heavier crude oil components into higher-value petrol and diesel instead of lower-value furnace oil.
Where Will the Investment Come From?
According to Basim Raza, Assistant Director at the NUST Institute of Policy Studies, the estimated $4.5 billion to $5 billion investment does not represent direct government spending but planned investment in the refining sector.
The government’s contribution is expected to remain limited to around 27.5 percent, mainly through escrow-based incentives and tax exemptions. Most of the financing will have to be raised by the refineries themselves through equity, commercial loans, foreign financing and strategic partnerships.
The process of securing capital is already underway. Pakistani refineries are reportedly holding discussions with lenders and investors in Saudi Arabia, Azerbaijan and Türkiye to finance the multibillion-dollar projects.
Industry officials have warned that policy approval was only the first hurdle. The refineries will still need to secure billions of dollars in long-term financing and foreign exchange while convincing lenders that the projects are financially viable.
Focus Is on Reducing Imports, Not Increasing Exports
Basim Raza said the primary objective of the policy is not to create an export-oriented refining industry but to reduce the outflow of foreign exchange.
Pakistan imports a significant portion of its refined petroleum products, putting pressure on the country’s foreign exchange reserves. The upgraded refineries are expected to process more crude domestically and reduce the need to import finished fuel products.
Petrol Prices May Not Fall at Pumps
The refinery upgrades should not necessarily be expected to result in cheaper petrol at filling stations.
According to Raza, improved refinery efficiency and higher-quality fuel are expected benefits, while the reduction in the import bill could strengthen energy security and conserve foreign exchange.
However, retail fuel prices will continue to be influenced mainly by international crude oil prices, the rupee-dollar exchange rate, petroleum levies and taxes. These factors are largely beyond the direct impact of refinery modernization.
The major benefits of the investment are therefore expected to be greater energy security and foreign exchange savings rather than an immediate reduction in pump prices.
Six Years of Delays
The policy change comes after years of delays in upgrading Pakistan’s refining sector.
Pakistan approved a transition from Euro-2 to Euro-5 fuel standards in 2020, with refineries initially seeking a two-year period for implementation. However, disputes over incentives and financial viability resulted in limited progress for almost six years.
Analysts have also linked refinery modernization to Pakistan’s offshore exploration efforts in the Indus Basin.
If commercially viable crude oil is discovered locally, upgraded refineries would be better positioned to process lighter and lower-sulphur domestic crude according to Euro-5 standards. Even if significant discoveries are not made, the upgraded facilities could still help reduce Pakistan’s dependence on imported refined petroleum products.
Petroleum Division to Handle Upgrade Agreements
In a related development, the government has decided to transfer responsibility for signing and overseeing Brownfield Refinery Upgrade Agreements from the Oil and Gas Regulatory Authority (OGRA) to the Petroleum Division.
Federal Petroleum Minister Ali Pervaiz Malik confirmed that the agreements will now be finalized directly with the ministry rather than the regulator.
He said the Petroleum Secretary, who is leading the preparation of the agreements, would remain involved in finalizing the arrangements. The agreements will be signed once they are completed.
The Director General Oil of the Petroleum Division will oversee implementation of the agreements.
The move gives the ministry a direct role in both negotiating and overseeing compliance with the multibillion-dollar refinery upgrade agreements.
Industry Welcomes Policy Approval
Energy analysts and industry representatives have broadly welcomed the policy approval, describing it as an important step toward addressing Pakistan’s long-standing foreign exchange pressures and improving fuel quality.
However, some experts have questioned whether the refinery upgrades will provide immediate relief to consumers, particularly because petrol prices remain closely linked to international oil prices, currency movements and government levies.
Financing also remains a major challenge. Securing several billion dollars in foreign loans under current market conditions will be a key test of whether the planned investments can be completed within the expected timelines.
What Happens Next?
Following approval of the policy amendments, attention will now shift toward implementation.
The next steps include finalizing individual financial agreements with the refineries, negotiating with foreign lenders and arranging financing for the multiyear construction and modernization projects.
The government’s planned roadshows in Gulf capitals are intended to accelerate investment and financing.
However, industry officials acknowledge that policy approval was only the first step. The success of the refinery modernization program will ultimately depend on whether the refineries can secure the required financing and complete the projects within the planned timelines.
