In a significant development for Pakistan’s energy sector, a Chinese investment corporation has agreed to provide $1 billion to Pakistan Refinery Limited (PRL) to support its ambitious refinery upgradation project. The investment aims to double PRL’s production capacity from 50,000 barrels per day to 100,000 barrels per day, in line with modernization efforts and enhanced fuel production capabilities.
The Chinese firm, which remains unnamed, stipulated that the investment must proceed without government involvement, emphasizing repayment in dollars without any external controls hindering the remittance process back to China. This requirement underscores a strategic alignment with State Bank of Pakistan policies permitting private sector retention of dollars for investment purposes.
Sources within Pakistan’s Petroleum Division disclosed that PRL has assured the Chinese Investment Corporation of generating necessary funds through petroleum product exports to facilitate loan repayment. Additionally, the China Export & Credit Insurance Corporation (SINOSURE) has advocated for minimal government interference in dollar transactions related to this investment.
PRL’s upgradation initiative, undertaken in collaboration with China’s United Energy Group (UEG), targets the production of Euro 5 compliant fuels, including high-speed diesel (HSD) and motor spirit (petrol), while phasing out less profitable furnace oil production. The project aligns with Pakistan’s commitment to cleaner, environmentally friendly fuels, aiming to significantly boost annual motor spirit production from 250,000 to 1.5 million tonnes and HSD production from 600,000 to approximately 2 million tonnes.
The memorandum of understanding (MoU) between PRL and UEG, signed in October 2023, highlights a strategic partnership focused on advancing Pakistan’s energy sector. This collaboration is expected to catalyze industry growth, contributing to a sustainable and environmentally responsible energy landscape in Pakistan.
PRL has further solidified its commitment to quality fuel production by signing licensing agreements with global leaders Honeywell UOP and Axens to ensure compliance with Euro 5 specifications for gasoline and diesel.
Under the revised “Pakistan Oil Refining Policy for Up-gradation of Existing/Brownfield Refineries 2023,” refineries like PRL, Attock Refinery Limited (ARL), and National Refinery Limited (NRL) are set to invest $3 billion collectively in upgrading their facilities. The policy incentivizes production with a 2.5% incremental incentive on HSD and a 10% deemed duty incentive on petrol for seven years, supporting the transition to Euro-V fuels and reducing furnace oil output.
While initial deadlines for policy compliance have been extended, PRL remains committed to enhancing its operational capabilities in alignment with national energy goals, leveraging strategic partnerships to drive sustainable growth and development in Pakistan’s refining sector.
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This comprehensive news article covers the recent developments surrounding PRL’s refinery upgradation project and its partnership with a Chinese investment corporation, highlighting implications for Pakistan’s energy sector and economic landscape.
