Chinese Firm Commits $1 Billion for PRL Upgradation

Chinese Firm Pledges $1 Billion for PRL Upgradation

A Chinese investment corporation has agreed to invest $1 billion in Pakistan Refinery Limited (PRL) to support its upgradation project. This move will significantly enhance the refinery’s production capacity, boosting it from 50,000 barrels per day to 100,000 barrels per day. However, the Chinese firm has placed a strict condition on the deal. They have made it clear that they do not want any government involvement in the repayment process. The Chinese company expects PRL to repay the loan in dollars, without interference from the Pakistani government.

Dollar Repayment and Export Plans

Currently, the State Bank of Pakistan (SBP) allows the private sector, including refineries, to retain dollars for investment purposes. The Chinese firm has urged that such controls should be eliminated to ensure smooth repayment. PRL has assured the investor that it will generate the required dollars through the export of petroleum products. These earnings will then be used to repay the Chinese investment corporation. Additionally, China Export & Credit Insurance Corporation (SINOSURE), which promotes China’s foreign trade, has also insisted on no government control over the dollar remittances.

PRL’s Expansion and Modernization Goals

PRL is currently undergoing an upgradation project to transition from a basic hydro-skimming process to a deep-conversion process. This shift will allow the refinery to produce Euro 5 compliant high-speed diesel (HSD) and motor spirit (petrol), reducing its reliance on the less profitable furnace oil. Although after the expansion, PRL’s annual production of motor spirit is expected to rise from 250,000 tonnes to 1.5 million tonnes. Similarly, HSD production will increase from 600,000 tonnes to 2 million tonnes. This project aligns with PRL’s strategy to meet growing domestic demand and contribute to a more environmentally friendly energy landscape.

Collaboration with China’s United Energy Group

PRL has signed a memorandum of understanding (MoU) with China’s United Energy Group (UEG) to begin the refinery’s significant expansion. The partnership will play a crucial role in modernizing Pakistan’s energy infrastructure and improving fuel quality. In addition, PRL has signed licensing agreements with Honeywell UOP and Axens, global leaders in refinery technology, to produce gasoline and diesel that meet Euro 5 specifications.

Pakistan Refinery Policy and Future Investment

Pakistan’s Oil Refining Policy for Up-gradation of Existing/Brownfield Refineries 2023 incentivizes refineries to upgrade their plants and produce Euro-V fuels. The policy offers a 2.5% incremental incentive on HSD and a 10% incentive on petrol in the form of deemed duty for seven years. However, PRL, along with Attock Refinery Limited (ARL) and National Refinery Limited (NRL), has committed to investing a total of $3 billion in upgrades. Once Pak Arab Refinery (Parco) and Cnergyico PK join the project, the total investment will reach $6 billion. The Cabinet Committee on Energy (CCOE) recently extended the deadline for refineries to sign implementation agreements for these upgrades, ensuring that the upgradation of Pakistan’s energy sector continues at a steady pace.