Attock Refinery set for $500m overhaul to meet Euro-V Standards

October 31, 2025 (MLN): Attock Refinery Limited (PSX: ATRL) has reiterated its commitment to undertake its long-awaited refinery upgradation project, estimated at  $500 million, once key fiscal and regulatory impediments are resolved.

The management shared this update during an analyst briefing session that held today following the company’s FY25 financial results.

The project, expected to take four to five years to complete post-agreement, will include the installation of a Continuous Catalyst Regeneration (CCR) unit and the revamp of the Diesel Hydro Desulphurization (DHDS) unit.

These upgrades aim to increase motor spirit (MS) output by 25%, align fuel quality with Euro-V standards, and reduce environmental penalties currently faced for producing lower-grade fuels. Management estimates that the upgradation will yield annual savings of Rs15–17 billion once operational.

ATRL remains the most efficient listed refinery in Pakistan, with the capability to process a diverse slate of crude oils. However, operational performance has come under pressure amid lower crude supplies from northern fields and weak demand for furnace oil (FO) following the government’s imposition of Petroleum Development Levy (PDL) and Carbon Surcharge Levy (CSL).

These levies have inflated local FO prices by around 80%, compelling ATRL to divert production toward exports, despite incurring additional transportation costs of Rs13,000–15,000 per ton from its site to Karachi Port.

The refinery operated at an average 69% utilization during FY25, slipping further to 65% in 1QFY26, compared to historical levels close to full capacity.

Management noted that crude availability in northern fields has recently improved, driven by seasonal winter demand, though this uptick may prove temporary.

To ensure steady operations, ATRL has requested the government to allocate 5,000 barrels per day (bpd) of crude from southern fields a proposal currently pending approval.

To support the industry, the government is in discussions with Qatar to defer or divert two RLNG cargoes per month, which could improve gas availability in the north and restore upstream crude production, consequently benefiting ATRL’s throughput.

On the financial front, ATRL reported profit after tax (PAT) of Rs12bn (EPS: Rs112.29) in FY25, down 53% year-on-year, primarily due to lower gross refining margins (GRMs) $ 9/bbl in FY25 versus $ 14/bbl last year and inventory losses of Rs1bn in 1QFY26.

Gross margins for the recent quarter stood at 1.6%, showing reduced capacity utilization and lower sales volumes.

The company continues to face unresolved sectoral challenges, including delays in sales tax refunds and uncertainty regarding the implementation of the Refinery Upgradation Policy 2023 (amended 2024).

The removal of zero-rating on petroleum products has rendered the upgrade projects financially unviable, as refineries can no longer claim input tax adjustments.

While the government temporarily allowed sales tax reimbursements via IFEM, no long-term resolution has yet been reached.

Despite these policy and operational headwinds, ATRL maintains a strong balance sheet, with Rs86bn in cash and cash equivalents (approximately Rs800 per share), positioning it well to internally finance its upgradation project once approvals are finalized.

Management emphasized that resolving sales tax and levy issues, ensuring consistent crude supply, and stabilizing policy implementation remain critical for sustaining operations and progressing with modernization efforts.

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