Government mobilizes after US-Iran war; efforts to restore $6 billion refinery investment intensify

Islamabad: Following the increasing tension between the US and Iran and concerns about global oil supply, the government has decided to resume the implementation of the Pakistan Refining Policy, which has been stalled for almost three years.

Federal Finance Minister Muhammad Aurangzeb assured the oil refinery sector in a recent meeting that corrective measures will be taken to remove policy obstacles in the budget for the fiscal year 2026-27 so that an investment of about $6 billion can be restored.

According to sources, Pakistan is spending about $2 billion in additional foreign exchange annually due to expensive imported petroleum products, while local refining of crude oil can significantly reduce this burden.

Petroleum Minister Ali Pervez Malik admitted that despite the launch of greenfield and brownfield refining policies in 2023, they could not be effectively implemented. He said that local refineries are a very important asset for national energy security.

He said that the US-Iran conflict has made it clear that Pakistan needs to increase local refining capacity by reducing its dependence on external supply chains.

The refinery sector has sought four key guarantees from the government to revive investment, including assurance of policy stability, permission to spend foreign exchange earned from furnace oil exports on upgrade projects, clarification of force majeure clauses, and IFEM adjustment to offset sales tax losses.

According to sources, Attock Refinery has informed the government that it is ready to sign the upgrade agreement as soon as the sales tax issue is resolved.

Officials say that the current refining system consists of old technology, which is increasing environmental pollution and carbon emissions. Upgradation projects will enable the production of Euro-standard environmentally friendly fuel.