Upgrade Agreement under amended policy: PARCO seeks 3-month extension of deadline
ISLAMABAD: Pak-Arab Refinery Limited (PARCO), the country’s largest refinery with around 38 per cent share in local petroleum products’ production, has sought a three-month extension in the deadline for execution of its c Pakistan Oil Refining Policy for Upgradation of Existing/Brownfield Refineries, 2023.
The Petroleum Division moved a summary before the Cabinet Committee on Energy (CCoE), seeking approval to extend the deadline from October 24, 2026, to January 24, 2027, to enable PARCO to complete its Board approval process and execute the required agreement.
The proposed extension would also allow PARCO to continue producing and marketing petroleum products below Euro-V specifications during the extended period, subject to the proposed approval.
READ ALSO: Pakistan’s three major refineries ink upgrade agreements with govt
According to the summary, the reduction in deemed duty on High-Speed Diesel (HSD), provided under Clause 6.1.3.6 of the Refining Policy, would remain applicable. The schedule for recovery of four instalments, each representing 25 per cent, would commence from the date of approval of the extension by the CCoE.
The Petroleum Division argued that the extension is necessary to facilitate PARCO’s completion of internal approval formalities and avoid potential disruption in domestic petroleum products supplies.
The Pakistan Oil Refining Policy for Upgradation of Existing/Brownfield Refineries, 2023, was amended by the CCoE through Case No. CCoE-01/01/2026 dated July 28, 2026. The amendments were subsequently ratified by the Federal Cabinet on August 10, 2026, and notified on September 10, 2026.
The amended policy provides incentives to existing refineries for undertaking upgradation projects aimed at producing Euro-V standard petroleum products and reducing furnace oil output.
Under the amended policy, M/s Inter State Gas Systems (ISGS) was designated as the policy implementation entity on behalf of the Petroleum Division.
Clauses 6.1.2.2 and 6.1.3.1 require refineries to execute Upgrade Agreements with ISGS within 45 days of notification of the amended policy, setting October 24, 2026, as the deadline.
To operationalise the policy, the draft Upgrade Agreement was approved by the Economic Coordination Committee (ECC) through Case No. ECC-171/26/2026 dated September 14, 2026, and subsequently ratified by the Federal Cabinet on September 17, 2026.
Following this, ISGS executed Upgrade Agreements with National Refinery Limited (NRL), Pakistan Refinery Limited (PRL), Cnergyico (CPL) and Attock Refinery Limited (ARL) on September 24, 2026.
After execution of the respective agreements, the Petroleum Division granted waivers to these refineries on October 7, 2026, from the requirement to produce and market petroleum products conforming to Euro-V specifications during implementation of their respective upgradation projects, under Clause 6.1.3.5 of the policy.
However, PARCO has not yet executed its Upgrade Agreement.
The summary states that the policy links the grant of the waiver to execution of the Upgrade Agreement under Clause 6.1.3.5, while Clause 6.1.3.6 separately prescribes deemed-duty consequences for failure to execute the agreement within the stipulated 45-day period.
PARCO has informed the Petroleum Division that approval of the Upgrade Agreement remains under consideration by its Board, with management maintaining close coordination to complete the process.
The company has consequently requested a temporary waiver pending completion of its Board approval process.
The Petroleum Division highlighted the importance of PARCO in the domestic petroleum products market, noting that it accounts for approximately 38 per cent of local production. It warned that failure to extend the deadline could have significant implications for domestic petroleum products supplies.
In particular, if PARCO is not allowed to produce petroleum products below Euro-V specifications following expiry of the deadline, a significant shortfall in petroleum products could emerge, necessitating additional imports and putting pressure on foreign exchange reserves.
The proposed extension is therefore intended to prevent potential supply-chain disruptions while allowing PARCO to complete the necessary corporate approvals and formally enter into the upgradation agreement.
The summary further proposes that the reduction in deemed duty on HSD should continue during the extended period, with the four-installment payment schedule commencing from the date the CCoE approves the extension.
Copyright Business Recorder, 2026