BYCO INVESTMENT A PLEASANT SURPRISE

LARGEST REFINERY, SINGLE POINT MOORING & PETROCHEMICAL COMPLEX ON CARDS

INTERVIEW: MOHAMMAD WASI KHAN, COUNTRY BUSINESS HEAD, BYCO OIL PAKISTAN LIMITED

AMANULLAH BASHAR
(feedback@pgeconomist.com)

Oct 1 - 7, 20
12

Mohammad Wasi Khan, Country Business Head of Byco Oil while expressing confidence into economic potential of the country and the unshakable commitment to the economic strength of the country said with a sense of achievement that Byco with an investment of over $ 1 billion in different projects including a refinery with a designed capacity of 120,000 barrel a day, a Single Point Mooring Petro-chemical project and a marketing companies and this huge project is well set to contribute significantly in the refining and market sector with the inauguration of country's largest refining plant located at Hub in close vicinity of Karachi sometimes in October next month. The marketing company has already reached 219 out lets all over the country.

In an exclusive interview Wasi Khan who carries 31 years of experience in oil and gas industry to his professional credit said that the upcoming refinery is accompanied by Pakistan's first Single Mooring Point at adjacent to Hub coastal area that would facilitate the refinery for direct supply of crude oil through this exclusive jetty. At the moment no major project is coming up in the country except Byco refinery that shows the unshakable commitment of the company into Pakistan economy.

Despite all odds and evens on the economic front of the country, Wasi Khan in a way appreciated the efforts of the present government to face the situation with an extra cool. The government continued to tackle and overcome issues sometimes stemmed from engineered by some elements of vested interests. The present set up of the government was not given a chance to carry out policies and implement some good decisions due to heightened political noise during the last four-five years. However country has enormous economic potentials and the time would be on its side in the years to come! Wasi Khan avoided making political aspect of the economy yet he indicated his liking for President Asif Zardari for his political acumen which he feels has the capacity to steer the economy out of the trouble water given the time and opportunity to implement decisions.

Wasi Khan initiated his career in Saudi Arabia, Aramco then joined National Refinery Limited (NRL) Karachi in 1981. He Held various key positions in all operations, technical and business functions of the refinery to become Deputy Managing Director (Operations). In 2005, He moved to Bosicor Pakistan Limited as President & CEO. He has on his credit a number of successfully completed major refinery projects and startup of the oil marketing business. Presently he is Country Business Head, Byco Oil Pakistan Limited.

Currently the energy sector is confronted with a difficult situation on the back of chronic circular debt issue that has adversely affected smooth supply of fuel to the oil consuming power generating units as well as well as refinery sector, when asked how would the new refinery would carry on business in the face of debt circular causing cash flow problems especially for the refinery sector?

Wasi Khan with a smile on his face observed agreed that circular debt is a serious issue as it has seriously eroded working capital of the refinery sector, it is quite simple to evaluate that we have to pay before the import of the crude oil and when the payments are stuck how we would purchase crude stock to keep up the supply, so it is an issue that need to be immediately resolved to keep up the wheel on the move. Hence the major impact of the circular debt is the problem of cash flow faced by the refinery industry, while another effect of the circular debt is the increasing financial cost. We have to run the business even in the face of liquidity shortage on account of stuck up payments. Companies have no option but to borrow money from the banking sector and bear the financial cost as well as the cost of debt servicing to the banking sector. This has resulted into increased bank borrowing and the overall impact of the situation is the abnormal increase in cost of doing business. The stuck payments have a double edge effect on the business. For instance we purchased oil from international market at a price of $80 per barrel and supplied to the same in the domestic market after refining but we were unable to use that money on time and if the international prices go up that means we are unable to correlate the cost of import and the sales in the market and that is whole problem that has reduced the asset value of the refining sector.

Replying about the sales strategy of the new refinery which is about to come on line in October next month? And what were the factors behind your decision to investment at such a massive scale while the energy sector is confronted with cash flow problems?

He said that the decision has already been taken on the back of investor friendly policies of the present government and the ministry of petroleum which is always will to encourage investment in the country. In this respect, Byco has entered into a sales and purchase agreement with Pakistan State Oil (PSO) under that agreement PSO would be buying at least 65 percent of our product and that would be a major facility to market our products in the country.

Since PSO was also suffering due to circular debt issue and don't you think that you will again be facing the payment problem with PSO? He said that under the agreement, the PSO will be required to open local letter of credit for purchase of our product which means that the letter of credit would be providing us the bank assurance for the payment of our supplies.

What would be refining capacity of the new refinery and how much of that you would be selling to PSO? The designed capacity of the project is 120,000 barrel a day but initially it would be running on 75 per cent of the capacity and out of the total production 65 percent would be purchased by PSO.

BYCO PETROLEUM PROFILE

Byco Busient Incorporated (BBI) is pioneering the change in the energy sector of Pakistan and initially entered the oil refining business through the formation of Bosicor Pakistan Limited (BPL). Byco and its associated entities have interests in the oil refining, petroleum marketing, chemical manufacturing and Infrastructure & Logistics in Pakistan :

Oil Refinery is located at Mouza Kund, District Hub, Lasbela, in Balochistan. The Company started its commercial production from July 1, 2004 and now its total refining capacity is over 35,000 barrels per stream day after debottlenecking/turnaround of the whole plant.

BPPL, the only refinery in Pakistan which has acquired marketing license from the start of its operation. During the year 2007, the Company has launched its fuel marketing activities managed by the Petroleum Marketing Business (PMB). PMB has developed progressively during this period and is now growing aggressively, so far around 219 retail outlets have been set-up, primarily focusing on retail segment and PMB is now expanding the canvas by targeting to become a dominant player in the industrial, international and retail segments. Going forward, PMB will be increasing its product portfolio by adding LPG and lubricants as well.

BOPL is in process of relocation, another mothballed, Hydro-skimming petroleum refinery with a crude refining capacity of 120,000 barrels per stream day, from United Kingdom . The project is being set-up next to Byco's existing refinery, on 100 acres leased Site in Mouza Kund estate, owned by Byco at District Hub, Lasbela, Balochistan. Targeting commissioning in October 2012.

With a vision to maximize the synergies in the petrochemicals sector, the sponsors are in the process of relocating and setting up a Petrochemical Complex, beside refinery, at a 75 acres leased site in Mouza Kund estate, owned by Byco at District Hub, Lasbela, Balochistan. This shall be the first Petrochemicals Complex in Pakistan with an initial capacity of 17,100 barrels per day to produce petrochemical products such as Raffinate, C-9, Benzene, Mixed Xylene, Para Xylene, and Ortho Xylene to meet the country's deficit requirements.

UTL, a fully owned subsidiary of BPPL, is an infrastructure Company, setup to facilitate the logistics of petroleum products. The Company is also in the process of developing Pakistan 's first Single Point Mooring (SPM) with the accompanying infrastructure. In the initial phase, the SPM facility will handle logistics for two Byco Refineries by connecting the SPM to the Refineries Shore Tanks enabling direct discharge of crude oil.