PACRA Maintains Entity Ratings of Pak Arab Refinery Limited

The ratings incorporate Pak-Arab Refinery Limited’s (PARCO or the Company) dual-sovereign ownership, with a 60% stake held by the Government of Pakistan (GoP) and 40% by Abu Dhabi Petroleum Investment Company (ADPI), a subsidiary of Mubadala Investment Company (UAE). The assigned ratings, together with its dual-sovereign ownership, underscore PARCO’s strategic importance in Pakistan’s domestic energy value chain. The Company remains integral to the country’s energy infrastructure, with an extensive pipeline network that facilitates the efficient and environmentally responsible transportation of petroleum products nationwide. Global refining margins remained under pressure during the FY25 amid volatile crude oil markets, geopolitical tensions, and shifting supply–demand dynamics. While product prices for gasoline, diesel, and jet fuel experienced intermittent increases, they generally lagged rising crude benchmarks, compressing crack spreads and constraining refinery profitability. Weak demand for residual fuels, particularly High Sulphur Furnace Oil (HSFO), which continues to face structural decline due to environmental and efficiency considerations, further weighed on international refining economics. Pakistan’s refining sector reflected similar pressures in FY25. Total refining capacity stood at approx. 22mlnMTPA, while consumption of major petroleum products increased to ~17.53mln MT, supported by improved macroeconomic stability, moderating inflation, and policy rate reductions. Local refineries, including PARCO, supplied 10.54mln MT, meeting roughly 60% of national demand, with the balance covered through imports. Despite demand recovery, sector profitability remained constrained by tighter product-crude spreads, declining global crude prices, and the continued inflow of untaxed HSD through informal channels, resulting in inventory build-ups and suboptimal utilization. FO demand weakened further due to the ongoing energy mix transition, although exports exceeding 1.4mln tones in FY25 provided partial relief. PARCO’s sales declined by 15.6% in FY25 to PKR 965bln, down from PKR 1,143bln in FY24, reflecting major maintenance activity (Turnaround-05) carried out at the plant during the first half of FY25. Early signs of recovery emerged in 1QFY26, with annualized 1QFY26 sales showing a 9.5% increase compared to the full-year sales of FY25. As of FY25, PARCO maintained a leading market share of 44%. The Company’s financial profile benefits from strong free cash flow generation, conservative financial policies, and a sound liquidity position. Its operations are moderately leveraged and funded through a mix of internal resources and short-term bank borrowings, with additional support from returns on investments in subsidiaries and associates. The equity base stood at approx. PKR 126,408mln as of September 2025. PARCO completed the TA5 activity successfully, performing major maintenance, inspections and repairs. Government made the first disbursement in 1QFY26 against the permitted adjustment of disallowed input sales tax for FY25, while PARCO and the wider industry continue to engage with the Oil and Gas Regulatory Authority (OGRA) and the Ministry of Energy (Petroleum Division) to finalize the mechanism for recovery of disallowed input sales tax for FY26.
PARCO continues to focus on the smooth execution of upcoming projects and remains engaged with the evolving policy landscape of the refining sector. Ongoing technological enhancements are expected to support operational efficiency and resilience.

About the Entity
PARCO, established in 1974, operates Pakistan’s most modern refinery with a 120,000 bpd capacity and a 2,000 km cross-country pipeline network, including PAPCO, where it holds a 62% stake. Its equity portfolio includes PARCO Pearl Gas (100%), PARCO Gunvor Limited (formerly TOTAL PARCO Pakistan Limited) (50%), and PARCO Coastal Refinery (100%). The Company is overseen by a ten-member Board comprising six directors nominated by the Government of Pakistan (including the Chairman and the Managing Director) and four nominated by ADPI (including one representing OMV), indicating the interests of the EAD. Mr. Irteza Ali Qureshi assumed the role of Managing Director in February 2024.