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A Strategic Blunder

A catastrophic proposal has reportedly been given by the Chairman of Expert Group on Petroleum to the Pakistan government for shutting down the country’s three oil refineries.

By Pirzada Faizan | November 2021


Crude oil, which is refined to produce all kinds of fuels like petrol as well as numerous byproducts like plastic, plays a critical role in driving economic growth in a country. For Pakistan, crude oil not only keeps its economic engine running but is also a key element of its national security. Since Pakistan does not have sufficient oil reserves, the country meets its ever-growing energy demands by buying and importing crude oil and refined products like motor spirit (petrol) or high-speed diesel from other countries.

In this environment, the oil refineries play a critical role in satisfying the nation’s energy needs. There are five oil refineries in Pakistan namely Attock Refinery, Byco Petroleum, National Refinery, PARCO, and Pakistan Refinery. These refineries convert crude oil into refined products and reduce the country’s requirements for importing petrol, diesel, kerosene, and a variety of other petroleum products, thereby saving millions in foreign exchange. The oil refineries also employ thousands of people, directly and indirectly. Furthermore, they also contribute substantially to the national exchequer. The refineries pay various levies and duties and are among some of the highest tax-paying sectors of the country.

However, the chairman of the Expert Group on Petroleum has reportedly suggested to the government to shut down three oil refineries – Byco Petroleum, Pakistan Refinery, and National Refinery. Such a move could be disastrous for the country considering the three facilities produce jet fuel and kerosene and play an important role in safeguarding the nation’s energy security. These facilities ensure Pakistan has ample supplies of strategic fuels and have also been managing the product’s supply chain.

The Expert Group on Petroleum is an independent body, formed by the government’s Economic Advisory Council, which advises the authorities on all kinds of commercial matters related to the petroleum industry. The Expert Group has given this absurd advice in the hopes that Pakistan’s long-time Arab friends, namely Saudi Arabia and the UAE, would set up oil refining facilities in Pakistan. The Expert Group believes that the existing plants would no longer be required and should be shut down. However, in reality, both Saudi Arabia and the UAE haven’t given any confirmation or indication about their seriousness to set up such facilities in Pakistan. The government officials have also not provided any details about whether any progress has been made in this regard. The highly valued refineries funded by foreign investors, for whom some are even willing to shut down local plants, exist only on paper.


The proposal to close down some of of the country’s biggest oil refineries seems to have been formulated for the benefit of one specific group – the fuel trading mafia which is mainly engaged in the business of importing petroleum products and seems to have been lobbying intensely to permanently close the country’s oil refineries. This will be nothing short of a strategic blunder, which could severely hurt the country’s energy security as well as the livelihoods of thousands of individuals employed by the oil refining industry. The economic costs could be immense, but the fuel traders will make windfall profits. With refineries out of the way, oil trading mafia will import huge quantities of refined products from foreign countries to earn substantial income at the expense of national interest.

For a country like Pakistan, which is an emerging economy with fast-growing energy needs, closing down well-established refineries will be nothing short of a catastrophe.

Additionally, the closure of three refineries could create even more problems at the country’s ports and terminals which have already been stretched beyond their capacity. Following the enactment of LNG terminals, the ports in Karachi have been continuously experiencing operational issues, hampering their ability to smoothly transport crude oil. The Pakistan State Oil (PSO), for instance, had to pay considerable demurrage charges in millions of dollars, owing to the severe congestion at ports. The Ministry of Maritime Affairs is planning to install two new LNG terminals but that will not improve the situation either. In the given scenario, if the existing refineries are shut down, this will put even more pressure on the ports and they will have to handle significantly greater quantities of such refined products as petrol and diesel. As a corollary, the ports will face more congestion which could seriously hurt the country’s energy supply chain.

One can never deny the fact that the oil refineries are already working to develop energy infrastructure assets that could strengthen Pakistan’s energy supply chain. Some have even allocated millions of dollars for such projects. But if the refineries are shut down, their entire investment will go up in smoke and the country will also lose an opportunity to enhance its energy processing, storage, and handling capabilities without using taxpayers’ money.

No country should ever hurt its strategic assets. Instead, steps should be taken to bolster their capabilities. The oil refineries are one of the pillars of Pakistan’s economy. They satisfy the nation’s energy requirements, produce all kinds of high-value petroleum products locally by processing crude oil, and reduce the country’s need to import expensive refined products. As a result, they cut down the country’s import bill. However, if the existing refineries are closed down, Pakistan would be spending billions more on buying costly refined products from foreign sellers.

For a country like Pakistan, which is an emerging economy with fast-growing energy needs, closing down well-established refineries will be nothing short of a catastrophe. The oil trading mafia may continue to lobby for the closure of oil refineries for their self-serving interests, but the concerned authorities shouldn’t pay heed to such advice. Rather, a slew of effective measures must be taken to safeguard the interests of the country’s energy sector in general and the oil refineries in particular.

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