Attock Refinery eyes recovery on improving outlook

January 06, 2026 (MLN): Attock Refinery Limited (ATRL) is entering a potential turnaround phase as improving global refining conditions begin to offset the challenges that weighed on performance over the past year.

Better domestic crude availability and renewed policy momentum are also supporting the outlook.

CY26 is increasingly viewed as a pivotal period for the company, with expectations of stronger earnings recovery and improved operating dynamics, according to insight securities. 

ATRL has significantly underperformed the broader market during the last 12 months, mainly due to delays in the brownfield refinery expansion policy and sustained pressure on profitability caused by weak refining margins and low capacity utilization.

After peaking in 2022, international refining margins declined steadily and touched multi-year lows in early 2025, directly impacting local refineries.

As a result, ATRL’s gross refining margin (GRM) fell to $5.8 per barrel in FY25 from $8.3 per barrel in FY24. However, this downward cycle has begun to reverse.

Industry outlooks indicate that refining margins are likely to remain resilient in 2026, supported by tight product markets, low global inventories and rising refinery utilization rates.

According to Rystad Energy, global utilization is expected to increase next year, keeping crack spreads elevated despite only modest growth in fuel demand.

Diesel markets in Europe and the United States are projected to remain tight, while gasoline margins could also find support as refiners adjust output levels and trade flows, provided further upside to refining economics heading into CY26.

ATRL’s capacity utilization has been constrained in recent years due to reduced availability of domestic crude oil from northern fields.

The issue stemmed largely from LNG oversupply, which forced authorities to manage pressure in the Sui Northern Gas Pipelines Limited (SNGPL) network by curtailing local gas production.

Since crude oil is often produced alongside gas, these curtailments also led to lower oil output.

Recent developments indicate that the LNG surplus is gradually being addressed.

A total of 21 LNG cargoes from ENI scheduled over the next two years have been diverted, while Qatar has reportedly agreed to redirect 24 cargoes in 2026.

In parallel, government initiatives such as allowing new RLNG connections and introducing subsidized tariffs on incremental electricity consumption are expected to absorb excess LNG in the system.

These measures should reduce the need for forced production cuts and support higher output from domestic oil fields.

On the supply side, the government has recently allocated 5,000 barrels per day of crude from the Naimat Basal field in the south to ATRL.

In addition, new discoveries at Baragzai, located close to the refinery, have reported encouraging flow rates of 4,100 barrels per day from the Datta formation and 2,280 barrels per day from the Kingriali formation.

These developments are expected to materially improve crude availability in the north, enabling ATRL to operate at higher utilization levels going forward.

Pakistan’s Refinery Upgradation Policy aims to modernize existing refineries, improve fuel quality to Euro-V standards and reduce reliance on imported refined products.

The policy offers a range of incentives, including customs duty protection on gasoline and diesel, income tax holidays and duty-free import of plant and machinery.

Refineries with capacities above 300,000 barrels per day are eligible for a 25-year customs duty of 7.5% and a 20-year income tax holiday, while smaller refineries qualify for a 10-year duty protection and tax exemption.

Upgradation projects also allow refineries to enhance margins by shifting output toward higher-value products such as motor spirit and high-speed diesel, while reducing low-value furnace oil production.

Despite the strong incentive structure, progress has remained stalled due to unresolved GST-related issues involving refineries, the Federal Board of Revenue and the IMF.

Recently, however, the Special Investment Facilitation Council (SIFC) has classified the brownfield refinery expansion policy as a top-tier priority, raising expectations that the long-standing deadlock may finally be resolved.

ATRL remains well positioned due to its robust financial profile and strategic importance within Pakistan’s energy infrastructure.

Located in Rawalpindi, the refinery primarily serves the northern regions of the country, providing a logistical advantage over peers that rely more heavily on imported crude.

Its dependence on domestic crude enhances supply security and lowers exposure to international freight and price volatility.

The refinery plays a critical role in supplying key petroleum products to the northern market, including jet fuel, which is essential for both commercial aviation and defense requirements.

Financially, ATRL holds cash and cash equivalents of approximately Rs86.5bn, translating to around Rs812 per share.

This strong liquidity provides significant capacity to fund future upgradation projects without excessive balance sheet stress.

With refining margins improving, crude supply constraints easing, policy momentum building and the stock trading at a steep discount to its sum-of-the-parts valuation.

Attock Refinery appears increasingly positioned for a turnaround, potentially translating into stronger share price performance in CY26.

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