Attock Refinery Plans $500 Million Modernization to Meet Euro-V Fuel Standards

October 31, 2025 —

Attock Refinery Limited (PSX: ATRL) has reaffirmed its commitment to proceed with its long-awaited $500 million refinery upgradation project, aimed at aligning Pakistan’s refining standards with Euro-V fuel specifications. The management shared these details during an analyst briefing following the company’s FY25 financial results.

The ambitious project—expected to take four to five years once fiscal and regulatory approvals are finalized—includes the installation of a Continuous Catalyst Regeneration (CCR) unit and an upgrade of the Diesel Hydro Desulphurization (DHDS) unit. These improvements are designed to boost motor spirit (MS) output by 25%, enhance fuel quality, and reduce environmental penalties currently incurred for producing lower-grade fuels. Once operational, the upgrades are projected to yield annual savings of Rs15–17 billion.

Despite being Pakistan’s most efficient listed refinery, ATRL’s operations have been impacted by lower crude supply from northern oil fields and declining demand for furnace oil (FO) following the imposition of the Petroleum Development Levy (PDL) and Carbon Surcharge Levy (CSL). These levies have inflated local FO prices by nearly 80%, forcing ATRL to divert part of its production toward exports—incurring additional transport costs of Rs13,000–15,000 per ton to Karachi Port.

During FY25, the refinery operated at an average utilization of 69%, which further declined to 65% in 1QFY26, compared to historical near-full capacity levels. However, management noted a temporary improvement in crude availability due to seasonal winter demand. To sustain throughput, ATRL has requested the government to allocate 5,000 barrels per day of crude from southern fields, a proposal still pending approval.

Additionally, the government is reportedly negotiating with Qatar to defer or divert two RLNG cargoes per month, which could improve gas availability in northern regions and restore upstream crude output—benefiting ATRL’s operations.

Financially, the company reported a profit after tax (PAT) of Rs12 billion (EPS: Rs112.29) for FY25, down 53% year-on-year, mainly due to lower gross refining margins (GRMs) of $9/bbl compared to $14/bbl last year, and inventory losses of Rs1 billion in 1QFY26. Gross margins stood at 1.6%, reflecting reduced utilization and lower sales volumes.

Key challenges persist for the refinery sector, including delays in sales tax refunds and uncertainty around the amended Refinery Upgradation Policy 2023–24. The removal of zero-rating on petroleum products has affected refineries’ ability to claim input tax adjustments, reducing the financial viability of such capital-intensive projects. Although temporary reimbursements through IFEM have been allowed, a long-term fiscal framework remains unresolved.

Despite these hurdles, ATRL retains a strong liquidity position, with Rs86 billion in cash and equivalents (approx. Rs800 per share), providing ample internal funding capacity for the upcoming modernization project.

Management reiterated that policy clarity, consistent crude supply, and timely resolution of tax and levy issues will be crucial in enabling ATRL to commence and sustain its modernization efforts—an essential step toward ensuring cleaner fuels and long-term energy efficiency in Pakistan.