In recent weeks, Pakistan has witnessed crucial negotiations between local refineries and the Oil and Gas Regulatory Authority (Ogra) concerning the implementation agreements (IAs) under the brownfield refinery policy. These discussions have brought to the forefront several pivotal aspects of the upgrade projects that deserve our attention.
The refineries are strongly advocating for the inclusion of clauses related to the termination of agreements and force majeure in the IAs. They argue that having these provisions is essential to provide them with the flexibility necessary to navigate non-compliance issues and unexpected calamities like the COVID-19 pandemic. The demand for such clauses is not unwarranted, as it can protect the refineries from unforeseen challenges and financial burdens.
The inclusion of force majeure clauses is crucial in times of unforeseen crises. The COVID-19 pandemic serves as a stark reminder of the unpredictability of global events. If a similar catastrophe were to hit the country during the refinery upgrade process, it is only reasonable that refineries should be allowed to seek force majeure to temporarily halt their obligations.
While these demands reflect the genuine concerns of the refineries, they also underscore the complexity of such agreements. Striking the right balance between regulatory compliance and industry needs is paramount. It is important to recognise that both are essential for the successful and timely upgradation of these refineries.
Under the brownfield refinery policy, these refineries will benefit from a 10% tariff protection/deemed duty applicable on motor gasoline and diesel’s ex-refinery price for six years. These incentives are instrumental in encouraging refineries to invest in upgrading their facilities. However, for these incentives to materialise, it is crucial that the final agreements strike a fair and mutually beneficial balance.
The successful upgradation of the refineries is not just a matter of economic interest for the stakeholders involved. It also holds the key to improving the quality of petroleum products in the country. The upgrade from Euro-III diesel to Euro-V will not only enhance the country’s energy standards but also contribute to reducing environmental pollution. As the deadline for finalising agreements approaches, it is imperative that the final agreements are fair and mutually beneficial, ensuring a win-win scenario for all stakeholders and a brighter future for Pakistan’s energy sector.