ISLAMABAD: After more than two years of negotiations, consultations and repeated delays, the draft Upgrade Agreement for Pakistan’s refinery modernisation programme is scheduled to be taken up by the Economic Coordination Committee (ECC) of the Cabinet for approval on Monday, September 14.
The ECC, chaired by the Minister for Finance and Revenue, is scheduled to meet on Monday and will consider the agreement as item number two on its four-point agenda.
The agenda also includes restructuring of the ownership and management of the Pakistan National Shipping Corporation (PNSC), settlement of financial issues confronting oil marketing companies (OMCs), and a review of automobile standards and regulations earlier decided by the ECC in September 2025.
The proposed approval represents a critical contractual step for implementation of the amended Pakistan Oil Refining Policy for Upgradation of Existing/Brownfield Refineries, 2023, under which existing refineries undertaking major upgradation projects are to receive incentives for producing Euro-V petroleum products, reducing furnace oil production and improving refinery configuration and efficiency.
The Cabinet Committee on Energy (CCoE) approved amendments to the refining policy on July 28, 2026, while the Cabinet ratified those amendments on August 10, 2026.
Under the revised framework, refineries are required to execute formal Upgrade Agreements with the Petroleum Division or its designated entity in order to avail themselves of the policy incentives.
Inter State Gas Systems (ISGS) has been designated as the implementation entity under the policy. It is responsible for executing the Upgrade Agreements, operating the Refinery Upgradation Accounts, monitoring upgrade projects, engaging technical consultants and auditors, and administering incentive payments.
A dedicated committee comprising the Secretaries of the Petroleum Division and Law and Justice Division, the Chairman of the Oil and Gas Regulatory Authority (OGRA), and a representative of the Special Investment Facilitation Council (SIFC) was constituted to finalise the agreement.
The committee worked with the Finance Division, National Coordination Committee on Marketing (NCMC), SIFC, ISGS, the refineries and legal counsel M/s Orr Dignam to settle the draft agreement.
According to sources, the draft was shared with the Law Division and Finance Division on September 1 for formal comments. The Law Division found the draft aligned with the Refining Policy, while comments from the Finance Division were considered alongside counter-comments before finalisation.
The summary signed by Petroleum Division Secretary Hamed Yaqoob Sheikh on September 8 states that the agreement was finalised through a consultative process and was not recirculated for further comments before being submitted to the ECC.
The agreement is reaching the ECC against the backdrop of growing frustration among refinery executives over the prolonged delay in completing the contractual process.
Usama Qureshi, Vice Chairman of Cnergyico Pk Limited, expressed cautious optimism over the scheduled ECC meeting but called for reconsideration of the penalty regime in view of the timeline under the revised policy.
“We hope the ECC will approve the Draft Upgrade Agreement under the revised Refining Policy, which is an important step towards enabling the industry to proceed with the planned refinery upgrades. We also expect the 2.5% penalty to be withdrawn, at least with effect from the date the CCoE approved the revised policy in early July. Once the revised framework had received CCoE approval, continuation of the penalty beyond that point would be difficult to justify,” he said.
Attock Refinery Limited (ARL) CEO Adil Khattak was more critical, questioning why the signing of the agreements had taken so long despite what he described as the strategic importance of the local refining industry.
“Inspite of the strategic importance of local refineries, now realised at last by the powers that be, the signing of the Refineries Upgradation Agreements is being delayed on one pretext or another,” Khattak said.
He said the draft agreements were now being submitted to the ECC for approval on September 14 despite the consent of the refineries and ISGS.
“Never heard of ECC approving such Agreements before. Looks like the bureaucracy is still not pushed to execute the long delayed refineries upgradation or is it to gather more funds in the name of penalising the refineries for delay which continue to accumulate till signing of the Upgrade Agreements with ISGS?” he said.
Khattak also raised a specific concern over the financial burden being imposed on ARL and National Refinery Limited (NRL), saying both companies had confirmed their readiness in writing to sign the Upgrade Agreements before the initial deadline of April 2024.
“It is specially unfair to ARL and NRL who had confirmed their readiness in writing to sign the Upgrade Agreements before the intial deadline of April 2024 and are now being penalised Rs. 7.5 million and Rs. 10 million per day respectively for no fault of theirs,” he said.
The penalty issue has consequently emerged as one of the most contentious aspects of the delayed implementation process. According to refinery executives, daily penalties have continued to accrue while the contractual arrangements required to formally commence the upgrade programme remained under consideration.
For ARL and NRL, the issue is particularly significant because the companies maintain that they had expressed their readiness to execute the agreements before the original deadline. The continuing accumulation of penalties has therefore raised the question of whether refineries should bear the financial consequences of delays occurring during the Government’s own approval and finalisation process.
The dispute comes at a critical stage for Pakistan’s refining sector, with the upgradation programme intended to transform existing brownfield refineries by improving their configuration, increasing production of cleaner Euro-V fuels and reducing reliance on furnace-oil-heavy output.
The programme is also considered important for reducing the mismatch between domestic refining capabilities and the country’s petroleum product requirements. Modernisation of local refineries has been linked with efforts to improve product quality, reduce inefficient fuel production and strengthen domestic refining capacity.
However, the prolonged gap between approval of the policy framework and execution of the Upgrade Agreements has become a major source of concern for refinery operators. The companies argue that they cannot fully proceed with projects tied to contractual incentives until the agreements are formally executed, while penalties linked to delays continue to accumulate.
The scheduled ECC meeting on September 14 could therefore become a decisive point for the refinery upgradation programme. Approval of the draft agreements would clear a major bureaucratic hurdle and allow the contractual process with ISGS to move towards execution.
At the same time, the treatment of penalties remains unresolved. Both Cnergyico and ARL have raised concerns over the continued application or accumulation of penalties, with Cnergyico seeking withdrawal of the 2.5% penalty at least from the date of CCoE approval of the revised policy.
It remains to be seen whether the ECC will address the penalty issue alongside approval of the Upgrade Agreements or whether the matter will be dealt with separately.
For the refinery industry, however, the significance of Monday’s meeting goes beyond approval of a contractual document. After years of policy discussions, consultations and delays, the ECC’s decision could determine whether Pakistan’s long-awaited refinery modernisation programme finally moves from policy commitments to actual implementation.