ISLAMABAD: Pakistan is set to sign long-delayed agreements with five oil refineries, unlocking more than $6 billion in planned upgrades to modernize aging plants and cut reliance on fuel imports, officials said.
But industry warnings that changes to the financial framework could derail the projects overshadowed the announcement.
The agreements with Pak-Arab Refinery Ltd., Pakistan Refinery Ltd., National Refinery Ltd., Cnergyico and Attock Refinery Ltd. are being finalized through back-to-back meetings between the Petroleum Division and Inter-State Gas Systems, according to local media reports.
“The signing parties are ready, and most probably these will be inked on Thursday,” local media reported.
The government has authorized ISGS to sign the agreements and oversee implementation, replacing an earlier arrangement that placed the Oil and Gas Regulatory Authority in charge of the process.
Upgraded refineries would be able to process a wider range of crude, including Iranian and Russian supplies, subject to applicable laws and international sanctions, an ISGS official said.
However, the multibillion-dollar modernization program risks stalling at the “paper agreement” stage if changes to the incentive mechanism make projects difficult to finance, industry sources warned. They pointed to a shift from jointly controlled escrow accounts to government-controlled accounts, which they said could undermine bankability and create fresh obstacles to reaching financial close.
“Signing an agreement is only the first step. Agreements and MoUs do not bring investment, bankable projects do,” a senior industry source said, speaking on condition of anonymity due to the sensitivity of the matter. “The real achievement will be when lenders accept the structure, financial close is achieved and investment actually starts flowing into refinery upgrades.”
The warning comes amid concern that substituting the joint escrow mechanism, originally designed to ring-fence incentive funds, with government-controlled accounts is not merely administrative. Industry officials argue the change alters control, security and accessibility of funds that form a critical part of the financial backing for refinery upgrades.
The issue is particularly significant because refinery modernization requires massive capital expenditure and substantial financing from both local and foreign lenders.
The Petroleum Division spokesman did not respond to repeated calls and a detailed question seeking comment on the reported escrow change.
