ISLAMABAD: The federal government has approved a new oil refining policy aimed at strengthening Pakistan’s energy sector by reducing dependence on imported fuel and increasing the domestic production of petrol and diesel.
The policy is expected to attract nearly $6 billion in investment, modernise ageing refineries, and improve the quality of petroleum products available across the country.
Developed in consultation with key stakeholders, including the Special Investment Facilitation Council (SIFC), the new refining policy is designed to transform Pakistan’s refining industry through technological upgrades and long-term investment. Officials believe the initiative will enhance energy security, reduce fuel import costs, and support sustainable economic growth.
A major objective of the policy is to increase the production of high-quality petrol and high-speed diesel while significantly reducing the output of furnace oil, which has seen declining demand in recent years. The government also plans to encourage the production of Euro 5-compliant fuels by offering refineries a seven-year incentive package, helping Pakistan meet international environmental and fuel quality standards.
Under the new framework, refinery operators must sign legally binding implementation agreements with the Oil and Gas Regulatory Authority (OGRA) within 90 days of the policy’s approval. These agreements are intended to strengthen monitoring, improve accountability, and ensure refinery upgrade projects are completed efficiently.
The policy also introduces investor-friendly measures to attract both local and international investment. Refineries will receive protection against future changes in taxation, environmental regulations, and foreign exchange rules. In addition, companies will be allowed to maintain foreign currency accounts to service external debt obligations, improving financial flexibility for large-scale infrastructure investments.
To enhance fuel security, all refineries will be required to maintain strategic crude oil reserves equivalent to 14 days of supply. Facilities processing imported crude oil must also keep an additional five-day reserve to ensure uninterrupted fuel availability during emergencies.
The government has further proposed a 10 percent regulatory duty on imported petrol and diesel to encourage domestic refining. However, refinery operators seeking benefits under the new policy must first clear any outstanding Petroleum Levy and Climate Support Levy obligations while relinquishing previous incentive packages.
Officials believe the comprehensive policy will modernise Pakistan’s refining sector, improve fuel quality, strengthen energy independence, and create a more attractive environment for long-term investment, ultimately benefiting consumers and supporting the country's growing energy needs.
