KARACHI, Oct. 21 (Focus Pakistan) — The National Refinery upgrade could transform Pakistan's only lubricant-base-oil refinery as the company prepares to invest in cleaner petrol, newer lubricant technology and reduced furnace oil production to keep pace with changing market demand.
NRL produces mainly Group I base oils. Local demand keeps tilting toward Group II, management told analysts, while synthetic Group III and IV lubricants hold less than 5% of the market. Group II oils go through hydroprocessing that strips out more sulphur and impurities, and blenders prize them for longer-lasting engine oils.
NRL has rolled lube base oil into a wider upgrade that also targets Euro-5 petrol and much less furnace oil. UK engineering consultancy Wood is running the feasibility study that will settle the configuration, technology and cost. In July, Chief Executive Asad Hasan put the bill at between $400 million and $1.2 billion. A September report narrowed NRL’s planned green fuel and bottom-of-the-barrel project to $300 million to $800 million.
Sixty Years, Three Refineries
The Karachi complex grew in layers. NRL commissioned its first lube refinery in 1966, a fuel refinery in 1977 and a second lube refinery in 1985. Diesel desulphurisation and isomerisation units followed in 2017.
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Those 2017 units explain why diesel sits outside the new plan. NRL remains the only refinery in Pakistan that produces Euro-V diesel. Petrol is the gap it still has to close.
That work has started. NRL has raised petrol output by 35%, though the extra processing has pushed up its chemical bill.
The plant also runs harder. Capacity utilisation climbed to 70% in FY26 from 56% a year earlier, and management expects more in FY27. On lighter crudes, NRL says it can run at 90% to 95% of its 70,000-barrel-a-day capacity.
Gulf Crude, Gulf Prices
Feedstock costs threaten that progress. NRL buys mostly spot cargoes out of Fujairah, including from the trading arms of Saudi Aramco and ADNOC. Regional crude carries premiums of $8 to $12 a barrel before freight, and freight has jumped too.
Pakistani crude supplies only 3% to 5% of the refinery’s needs.
Hasan has publicly discussed moving NRL from spot purchases toward long-term contracts as tensions around the Strait of Hormuz unsettle supply. For now, the spot market still sets the price of nearly every barrel the refinery processes.
Furnace oil remains NRL’s most awkward product. The company exports about 70% of it and sells the rest at home, down from 90% to 95% exported in FY26. Management said overseas margins still beat domestic prices.
Lube base oil, bitumen, naphtha and wax also leave Karachi on export ships, giving NRL four to five foreign revenue streams while it plans to shrink the dirtiest one.
Paying for the Rebuild
NRL signed its upgrade agreement with the government on Sept. 24, along with three other refiners. The signing unlocks reimbursement of customs duty on crude, which NRL had earlier reversed in its books, management said.
The policy lets NRL fund up to 27.5% of a new plant’s cost from an OGRA escrow account, with internal cash and debt covering the rest. To keep borrowing down, the board has stopped paying dividends.
The ECC has given refiners five years to finish. Before then, Wood’s study has to answer the question that matters most for Pakistan’s lone lube maker: whether its oldest business gets new units, or simply makes way for petrol.
