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Attock Refinery’s profit-after-tax rises in Q1 of 2017

Attock Refinery Limited (ARL) is the pioneer of crude oil refining and always providing the best quality products in Pakistan. The Company is believed to sustain smooth supply of increased volumes of value-added and environment-friendly products and including its operations through upgraded state-of-the-art hardware in Pakistan. ARL’s officials said that the technical studies are under way for installation of Continues Catalytic Reformer for more improvement of Motor Gasoline specifications.

The financial experts of ARL explained in the first quarter ended September 30, 2017 that the operations activities and financial results are encouraging. However, fluctuation in prices of product and crude oil remained favorable. It is also added that there is also improvement in the volume of value-added products as a consequence of presently completed upgradation project.

Consequently, Attock Refinery’s profit-after-tax (PAT) from refinery operations has risen from Rs28 million in first quarter of preceding year to Rs758 million in the period under review. The financial experts also mentioned in the quarterly financial statement that the non refinery income, comprising dividend income of Rs1,125 million has not been accounted for during the period under review. In the first quarter of preceding year the non refinery income was Rs1,200 million.

Various industry experts also calculated Oil Marketing Companies (OMCs) in Pakistan are led by volumetric sales nowadays. But the present growth in petroleum products did not start till after FY2013. It was when the oil rates crashed that the local sales of petroleum products started peaking up. During FY2013, it is said that the local OMCs sector saw only 3.0 percent rise in overall petroleum trade in Pakistan. This came from the fall in furnace oil while petrol sales were started rising. FY2014 was a better year for the OMCs sector, driven mainly through volumetric growth in retail fuels. During FY2015, oil-marketing segment stayed eventful as prices plunged to historic lows before recovering. However, the industry became more turbulent profitability wise as falling oil price in the worldwide market considerably affected financial presentation of downstream oil marketing firms.

In spite of all above discussion, Attock Refinery Limited was operated at 93 percent capacity. The refining throughput during the quarter under review was 4.402 million barrels (September 30, 2016: 3.915 million barrels) while the sales volume was 4.422 million barrels (September 30, 2016: 3.882 million barrels). Furthermore, ARL’s operations department has four distillation units viz. HBU-I, HBU-II, HCU and Lummus. Downstream units include Reformer/Isomerization units and Diesel Hydro De-Sulfurization unit for preparation of premium quality gasoline and low sulfur diesel, respectively. Auxiliary units like Hydrogen unit, Amine unit, Sour Water Stripper and an Effluent Treatment Plant are also in operation for producing prime quality products which are LPG, premium motor gasoline, jet fuels, kerosene, high speed diesel, light diesel oil, furnace fuel oil, Mineral Turpentine oil, Jute batching oil, solvent oil and various grades of bitumen.

 

Fuel oil demand

The US Energy Information Administration forecasts that Brent spot prices will average $56 a barrel in 2018 and that supply growth from the US, Brazil and OPEC will raise oil inventories by 100,000b/d. They also expect OPEC to extend its present production cut strategy beyond March 2018. Various economic sources mentioned that Pakistan’s fuel oil demand is likely to drop from 9.6mt in fiscal 2016-17, running from July to June, to 4.5mt or less by fiscal 2019-20. Fuel oil imports could fall by up to 60 percent by fiscal 2019-20 as the power sector switches to gas feedstock. This would consequence in a drop in imports from 6.6mt in fiscal 2016-17 to 2.64mt in fiscal 2019-20. Fuel oil consumption has declined presently, following a government decision on October 27, 2017, to halt power generation from oil-fired units with a combined capacity of more than 4,000MW per day. The decision came amid the start-up of Pakistan’s second LNG terminal, the beginning of the slow winter demand season versus summer and the government’s resolve to reduce power production from aging fuel oil plants — which cause more pollution and are inefficient and expensive compared to their gas-fired equivalent. As fuel oil orders from the power plants declined abruptly, stocks increased rapidly at the import terminals and domestic refineries, delaying deliveries of imported cargoes and disrupting operations of local producers. No new fuel oil imports have been booked since. November local fuel oil sales were at 402,000 mt, down 29 percent yearly, and 55 percent lower month on month. Port stocks of fuel oil rose to 280,058mt by late November, worth Rs41.9 billion, resulting in severe import delays and demurrage costs per cargo of $15,000/day.

Circular debt

Pakistan’s circular debt in energy sector unluckily has been an ongoing issue since 2008. Debt-burdened power utilities cannot make timely payments to the country’s oil suppliers, who in turn cannot meet their global payment obligations, leading to a credit crunch and supply disruptions. Various sources of the country mentioned that power producers are grappling with widespread electricity theft, payment delays and defaults by their customers — counting government offices and state-owned firms and high downstream subsidies that prevent them from recovering the costs of fuel purchases, power generation and distribution. Pending payments have snowballed back to Rs 625 billion, or almost $5.65 billion, since July 2013.

Conclusion

ARL endeavors to protect the environment and to ensure health and safety of its employees, contractors, and customers and work for continual improvements in HSEQ systems.

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