KARACHI: Pakistan’s oil refiners are looking to foreign lenders and investors to finance multibillion-dollar upgrades of the country’s aging refining infrastructure, industry executives said on Monday, with Saudi Arabia, Azerbaijan and Türkiye among potential sources of funding.
The upgrades, estimated to require around $5 billion in investment across the industry, are planned under Pakistan’s recently amended Brownfield Refining Policy, which offers incentives for existing refineries to modernize their plants, produce cleaner fuels and convert low-value furnace oil into higher-value petroleum products.
Pakistan has five major refineries — Pakistan Refinery Limited (PRL), National Refinery Limited (NRL), Pak-Arab Refinery Limited (PARCO), Cnergyico Pk Limited and Attock Refinery Limited (ARL) — with a combined crude processing capacity of about 350,000 barrels per stream day.
PRL Chief Executive Officer Mohsin Ali Mangi said the scale of the planned investments meant much of the financing would have to come from overseas because Pakistan’s domestic capital markets and banks lacked the capacity for projects of this size.
“Most investments will be foreign as there is no appetite in the local stocks exchange to generate equity,” Mangi told Arab News.
“Nor is there any appetite in the banking sector,” he added.
Mangi said PRL planned to invest about $1.9 billion after completing front-end engineering and design, or FEED, which establishes the technical scope and estimated cost of a major industrial project, and receiving bids covering engineering, procurement, construction and financing.
Separately, Cnergyico Pk Limited Vice Chairman Usama Qureshi said his company planned to invest approximately $1.2 billion in its refinery upgrade in phases.
“Given the scale of the investment, we have structured the upgrade program in three phases,” Qureshi told Arab News.
The company plans to first upgrade its products to meet Euro-V fuel specifications, then install facilities to convert lower-value furnace oil into higher-value petroleum products and finally increase its processing capacity by 28 percent to about 200,000 barrels per day.
Such modernization would turn existing plants into what are known as “deep-conversion” refineries, which can process heavier, lower-value components of crude oil into more valuable products such as petrol and diesel rather than leaving a large proportion as furnace oil.
The government approved amendments to the Brownfield Refining Policy on July 28, clearing a key regulatory hurdle for the long-delayed upgrades. “Brownfield” projects involve expanding or modernizing existing facilities rather than building new refineries from scratch.
Refiners are now working toward signing individual upgrade agreements with the government setting out the terms under which the projects will proceed.
Mangi said a draft upgrade agreement was being reconciled with the government’s policy framework to ensure its terms were consistent with the amended policy.
“All the refineries are in consensus. The last touches are being done. It has been negotiated for a long time. Hopefully in the next four weeks it should be final,” he said.
But securing the money required for the projects would be the next major challenge, Mangi said, particularly because the financing packages would require foreign debt.
“It will require at least six to 12 months. Because in Pakistan arranging such a big financing will be challenging as it will involve foreign debt component,” he said, referring to the time needed to arrange financing.
PRL was already engaging with foreign lenders and potential equity investors, Mangi said.
“There is definitely an opportunity in Saudi Arabia. We are talking about potential investors in Azerbaijan and Türkiye. So yes, there is an opportunity,” he said.
Mangi said issues including governance and the mechanism for disbursement still required attention.
A senior official at another Pakistani refinery said approval of the amended policy was only the first step, with refiners still needing to secure several billion dollars in long-term debt and foreign exchange and convince lenders that the projects were financially viable.
The bigger test, the official added, would be whether investors had confidence “that the agreed fiscal and regulatory framework will remain stable for the life of these projects.”
The official requested anonymity because he was not authorized to speak publicly on the matter.
Pakistan’s Petroleum Minister Ali Pervaiz Malik and Petroleum Division spokesperson Zafar Abbas did not respond to requests for comment on the industry’s concerns or whether the government was helping refiners secure financing.
