Pakistan expects $5bn refinery investment deals from next month

LAHORE: Pakistan expects oil refinery companies to sign investment agreements worth around $5 billion from next month to upgrade the country’s ageing refining infrastructure, while Turkish Petroleum is set to begin offshore drilling in Pakistani waters later this year, Petroleum Minister Ali Pervaiz Malik said on Sunday.

The initiatives are part of the government’s broader strategy to increase domestic oil and gas production, modernise the country’s refining capacity and reduce its heavy reliance on imported energy.

Speaking at a ceremony in Lahore, Malik said that the government had taken steps to create an environment conducive to investment in the petroleum sector, particularly after decades of underinvestment in the country’s refineries.

“From next month, you will see investment agreements worth $5 billion being signed,” Malik said, stressing that these would be “actual investment agreements rather than memoranda of understanding (MoUs)”.

“Companies will sign these agreements, and you will see investors from around the world making progress towards transforming our refineries into some of the best refineries in the world,” he added.

Pakistan to revive offshore drilling

Malik said that Pakistan was also preparing to revive offshore oil and gas exploration after a gap of nearly 20 years, with “Turkish Petroleum” set to begin drilling activities in Pakistani waters.

“Turkish Petroleum is also bringing its seismic survey vessel to Pakistani waters,” the minister said.

He said that the Turkish company, in collaboration with Pakistan, would inaugurate offshore drilling activities that had remained suspended for around two decades.

The drilling is expected to begin in September or October, he said, adding that the offshore exploration programme could pave the way for substantial investment in Pakistan’s energy sector.

Turkish Petroleum was among the companies awarded offshore acreage following Pakistan’s offshore licensing round, under which 23 offshore blocks were awarded.

Malik said that the arrival of the Turkish company’s seismic survey vessel represented an important step towards reviving exploration in Pakistan’s offshore frontier.

The government hopes that renewed exploration will help discover indigenous oil and gas reserves and eventually reduce the country’s dependence on imported energy.

Ageing refineries require billions in investment

The petroleum minister said that Pakistan’s existing refineries had suffered from decades of inadequate investment and were operating with outdated technology.

He said that many of the country’s refineries were based on old hydro-skimming technology and required substantial investment to upgrade their capacity and improve the quality of petroleum products.

“When you have not invested in your refineries for 70 years, when your refineries are outdated and hydro-skimming refineries, and when you do not have a refinery policy under which the $5 billion investment required to upgrade the refineries can be made, then how can you make use of them?” Malik said.

The government approved changes to its refinery policy last month in an effort to unlock investment in refinery upgrades and increase domestic production of petroleum products, particularly diesel.

The modernisation programme is aimed at improving the efficiency of domestic refineries, enhancing their ability to produce higher-quality fuels and reducing the country’s dependence on imported refined petroleum products.

Malik said that Pakistan currently imports around 90 per cent of its oil requirements, leaving the country’s energy supply and domestic fuel prices vulnerable to fluctuations in international markets.

The dependence on imports has also exposed Pakistan to external shocks caused by geopolitical tensions and disruptions to global energy supply chains.

The vulnerability has become more pronounced during the ongoing US-Iran conflict, which has pushed up crude oil and refined-product prices and disrupted shipping through the Strait of Hormuz, a key global energy corridor.

The minister said developing domestic energy resources and increasing refining capacity were therefore critical to strengthening Pakistan’s energy security.

Gas-sector circular debt exceeds Rs1.5 trillion

Malik also highlighted the government’s efforts to address the longstanding circular debt problem in the gas sector, which he put at more than Rs1.5 trillion.

He said that the accumulation of unpaid liabilities had discouraged oil and gas companies from investing in exploration and development projects.

“If we have failed to pay more than Rs1,500 billion in dues to our oil and gas companies for years, can any company invest in Pakistan and expect to make a profit?” he asked.

According to the minister, drilling an oil or gas well costs around $25 million onshore, while the cost of an offshore well can reach approximately $100 million.

He said the government had managed to stop further accumulation of gas-sector circular debt over the past year without increasing gas prices.

Malik said the government was also working with the International Monetary Fund to address the existing stock of liabilities.

“Within one year, not only was the mountain of circular debt stopped, but I am pleased to say that by June 30 this [fiscal] year, there will be not a single rupee added to the circular debt,” he said.

Focus on reducing import dependence

The minister said that attracting fresh investment in domestic oil and gas exploration was essential for reducing Pakistan’s dependence on imported energy.

He said the government’s strategy centred on three key areas: reviving exploration, upgrading refineries and improving the financial health of the energy sector.

The offshore drilling programme with Türkiye, he added, could open a new chapter in Pakistan’s search for indigenous hydrocarbon resources, while the planned refinery investments would strengthen the country’s capacity to process crude oil domestically.

Malik said that the government had also made efforts to provide relief to consumers and contain the impact of higher international oil prices despite limited resources.

“Petrol is still expensive today, but we did not allow a shortage of petrol anywhere,” he said.

He said Pakistan had maintained fuel supplies despite the challenges created by international market volatility and regional tensions.

The minister also referred to fuel restrictions in neighbouring countries, saying consumers in some neighbouring states were being provided only two litres of petrol upon showing an identity card.

Pakistan’s next challenge is economic strength

Addressing the broader economic and political situation, Malik said Pakistan had faced significant economic challenges during the US-Iran conflict but had managed to maintain stability through difficult policy decisions.

He credited Prime Minister Shehbaz Sharif with taking difficult decisions and putting the economy on a path towards recovery, saying the country’s next objective was to achieve greater success on the economic front.

Malik also praised Pakistan’s armed forces, saying their capabilities and professionalism had been recognised internationally.

He said Pakistan had emerged as a guarantor of regional peace and security during the Iran-US conflict and described the recently signed **Makkah Joint Defence Agreement** as a source of pride for the nation.

According to the minister, the economic strength of Saudi Arabia, Türkiye’s development and Pakistan’s defence capabilities could play an important role in strengthening regional cooperation.

Malik said the government remained focused on practical politics and national development, while recalling former prime minister Nawaz Sharif’s role in making Pakistan a nuclear power.

The petroleum minister said Pakistan now needed to build on its strategic strengths by improving its economic performance, strengthening energy security and attracting investment into sectors capable of reducing the country’s dependence on imports.

The planned $5 billion refinery investments and revival of offshore drilling with Türkiye are expected to form a key part of that effort, although the success of the strategy will ultimately depend on sustained investment, financial reforms and commercially viable discoveries of domestic energy resources.