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The deregulation of price and import of oil has already started attracting world-leading players towards energy sector in Pakistan

Mar 25 - 31, 2002

The oil-refining sector in Pakistan is going to have another refining unit having a capacity to refine 30,000 barrel per day by October-November this year.

Aamer Abbasi, Director of the new refinery told PAGE the slightly used plant has been imported from the United States and is housed adjacent to Hub Power Project near Karachi. The total cost of the project is estimated at $50 million, Abbasi said.

Being set up by a Pakistani Company namely Bosicor Pakistan Ltd, the financing of the project is drawn from local and foreign banks with 60 per cent equity and 40 per cent debt financing, it is learnt.

Currently, the refining sector in Pakistan has a total refining capacity of 11 million tons a year as against the consumption demand of 18 million tons per annum. The already in production are including National Refinery, Pakistan Refinery, Attock Refinery and the recent addition of Pak Arab Refinery (PARCO).

On the supply side of the crude, the new refinery has entered into arrangements with French Energy Company TotalFinalElf to supply around 1.3 million tons of crude oil per year from Qatar.

The management of the new refinery, it may be recalled had signed a 10-year agreement with country's largest oil marketing company Pakistan State Oil (PSO) in 1999 to market products. However, in order to update the terms and conditions, the Bosicor and the PSO are going to sign a fresh agreement this week to market products of the refinery, informed sources disclosed.

Under the fresh agreement PSO will be entitled to lift 100 per cent of the products produced by the forthcoming refinery for next five years.

PSO, which is the largest oil marketing company both in the public and private sector, is lifting 75-80 per cent of the total products of the National Refinery. PSO lifts 50 per cent of the furnace oil and 22-23 per cent of the motor gasoline produced by the Pakistan Refinery, 50 per cent products of Attock Refinery and 72-73 per cent of PARCO products.

It is however interesting to note that latest addition to the refining sector is being made at a time when Pakistan's total demand for petroleum products is on the declining side. The demand fell 0.5 per cent to 17.6 million tons in the 2000-01 fiscal year and registered further drop of 9.5 per cent in the first half of the current fiscal. The oil industry people however are pinning hopes that demand is expected to pick up soon.

Pakistan had been experiencing decline in demand of various POL products because of low industrial activity plus the policy of the government to shift the major oil consuming industry from oil to gas or coal fired system. A considerable size of Thermal Units have already been shifted to the natural gas while the entire cement industry and transport sector is in the middle of the shifting process.

The government policy to encouraging conversion process from oil to gas and other energy sources has started getting positive feedback. As a result of incentive based policy, the CNG stations are experiencing an unprecedented growth and are bound to get more profitable for the investors as the governments offers attractive deals and promotional policies for facilitating the businessmen. All equipment for CNG refueling and vehicle conversion is exempt from import duty up to October 2002. Retail price of CNG is totally deregulated. Approximately 170,000 gasoline run vehicles have so far been converted to CNG and the figure is expected to double shortly.

In the changing scenario, the oil consumption is likely to go down further and the energy sector may be in a position to have an export surplus. At present there are 167 CNG stations in Pakistan, which have been planned to increase their number up to 300 by the end of the current year.

Recently, Pak-Arab Refinery Ltd (Parco) has floated an international tender for export of 30,000 to 45,000 tons of lead free motor gasoline.

Parco has asked interested bidders to quote only fob prices in their bids.

The bidding is scheduled for March 28, 2002. The company has quoted the lifting time between April and May 2002. The refinery has been producing surplus motor gasoline enabling it to export this product for earning foreign exchange.

The government over the last two years has taken bold initiative to enhance the development of the petroleum industry. Resultantly, the process of exploration and development of oil and gas fields is accelerated and increased foreign investment in this sector.

All these developments indicate towards enhanced activity in the energy sector of Pakistan in the days to come especially in view of forthcoming privatization of 18 oil/gas fields besides sell of the giants like Oil and Gas Development Corporation (OGDC), Pakistan Petroleum Limited (PPL), Pakistan State Oil (PSO), Attock Refinery, National Refinery and Karachi Electric Supply Corporation (KESC). All these plans are going to assign a prominent role to the private sector to bring local and foreign investment at a massive scale in this sector.

The deregulation of price and import of oil has already started attracting world-leading players towards energy sector in Pakistan.