Pakistan refiners warn $6bn upgrades at risk due to fuel price deregulation plan

KARACHI: Pakistan's plans to deregulate fuel prices could lead refiners to halt planned upgrades worth up to $6 billion and force some refineries to close, some of the country's top refiners said in a letter to the country's oil regulator.

Looking to drive down prices for consumers, the South Asian nation's Oil & Gas Regulatory Authority (OGRA) has proposed that oil marketers and refineries be allowed to set fuel prices, instead of the government setting prices.

As part of the change, OGRA proposed scrapping or reviewing a rule that requires fuel buyers to purchase supply from local refineries, another issue the refiners said could result in "disastrous consequences".

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The refiners -- state-run Pakistan Refinery and private domestic refiners Pak Arab Refinery, Attock Refinery, Cnergyico, and National Refinery -- said they were already struggling to operate near full capacity, and asked that they be consulted before the implementation of "irrational recommendations".

"The refining sector requires OGRA support through pragmatic and supportive measures, rather than suggesting ways that if implemented would result in their permanent closure," the refiners told OGRA on Monday in a letter, which was reviewed by Reuters.

The deregulation was aimed at boosting competition and protecting the public interest, OGRA told Reuters in a statement on Tuesday but did not respond to specific questions on the letter from the refiners.

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However, it said in an April 17 presentation reviewed by Reuters the potential impact of deregulation on refinery upgrades had to be assessed carefully, calling it a challenge.

"The refineries upgradation will bring in investment of $5 - 6 billion and not only result in cleaner environment friendly fuels but also result in savings of precious foreign exchange of the country," the refiners wrote in the letter to OGRA.