The crude oil production is
sufficiently matching to the world oil demand, rather it is half a
million barrel surplus, owing to inadequate refining capacity which is
in fact the grey area triggering high the oil prices. This was pointed
out by Kalim A. Siddiqui, PSO's Executive Director Customer Services in
In this backdrop, the world oil
producers are required to enhance refining capacity to bridge the
widening gap between demands and supply.
Kalim A. Siddiqui, PSO's
Executive Director Customer Service, has a deep insight and a
discernible eye on the happenings in the oil regime and their fallout on
the developing economies, especially in this region.
The rocketing oil prices
usually wipe off the economic gains causing serious concern for the
Kalim, while discussing the
high oil prices, was of the view that actually it is the demand, which
generally determines the prices. Looking at the demand and supply
situation, he identified that streamlining the refining capacity to
enhance finished oil production is vital to bridge the gap between
demand and supply.
Look at the global economic
scenario, GDP growth and economic development is taking place rapidly in
China, India and Brazil, Chilly and of course Pakistan too was not
Pakistan's GDP growth was
registered at over 8 percent last year and almost similar level is
likely to be achieved this year too. As a principal, GDP growth directly
influences consumption of petroleum products and other energy resources
hence it is increasing energy consumption almost everywhere in the
On the supply side, the world
oil production was estimated at over 84 million barrels per day, while
the crude oil production is also quite sufficient to match the demand
that means there is no deficit in supply and demand of crude oil. The
problem exists only on the refining side, which is creating a shortfall
in the supply of finished products. As against the demand of 84 million
barrels a day, the world refining capacity comes to 82.2 million barrels
and it is the deficit in refining capacity which is causing price spiral
the world over.
Analyzing the oil regime
economics, Kalim also pointed out other eventualities which play their
role in enhancing the price level such as natural calamity in the form
of hurricanes in the United States where these sea storm-related factors
contributed in shooting up the oil prices. There was a time when price
shot up even to $70-71 a barrel.
Weather also plays its role in
enhancing the demand. Look at the ensuing winter, which always almost
doubles the oil consumption and ultimately affects the price level of
the petroleum products.
Coming back to his early
assessment, Kalim observed that it all depends when and how much the
refining capacity of the world is enhanced.
He advocated strongly for more
refineries in addition to those already in the pipeline, as by the time
these refineries come into production it will continue to affect oil
In the context of Pakistan we
need more refineries. At present, Pakistan is facing a deficit of
100,000 to 150,000 barrels a day in refining fuel oil and diesel. The
situation calls for immediate increase in refining capacity especially
in the years to come.
Refinery capacity: Counting on
his finger tips he said that currently Pakistan Refinery has a capacity
of 40,000 barrels a day, National Refinery 60,000, Parco 100,000 and the
Attock Refinery 35,000 barrels, while newly born Bosicar also
contributes some 15 or plus making the total volume at around 270,000
Somehow, the higher oil prices
are a discouraging factor both for the normal consumers as well as the
industrial consumers as it enhances the cost of production. In fact the
price factor adversely affects the rate of consumption which is
declining in Pakistan. Besides prices, shifting over to natural gas was
however another factor behind the fall in oil consumption.
Outlining the overall economics
of the energy regime, Kalim said that actually Pakistan is fortunate, as
the nature is kind enough to bless the motherland with precious natural
gas, which can be described as a savior to our energy consumption.
Currently, natural gas contributes 42 percent in the energy mix, while
the share of petroleum products is only 30 percent, and 12 percent coal
and the hydel resources. Out of 30 percent POL consumption of the total
energy mix, 25 percent is net through local crude oil. We are
comparatively importing a very small quantity of crude only because of
availability of alternative options. Had we not lucky enough to have gas
resources, the import bill of oil would have been much higher than the
Over the question of cross
border gas pipeline line project, he was in agreement that time is
running short. It is the time to take the cross border pipeline project
seriously in view of the growing demand for gas as the shortfall may
become crucial soon after 2008, he said, adding, if the supply was not
supplemented we would be in crisis.
As a responsible and
respectable corporate entity, PSO has attained a leading position in the
oil regime of the country. It is the largest oil company in the public
sector and moving towards privatization.
"Today we are leaders in
the industry for the last 5 years, on the back of tireless efforts by
the top professionals at all tiers of the organization who were inducted
into PSO to produce results and to bring PSO on the top," he
His attention was drawn towards
the hefty profits being earned by the oil marketing companies,
especially by PSO despite being a public sector organization. Before he
comes out with his remarks, Kalim took a brief pause and probably after
calculating investment and return figures, he observed confidently that
we are a commercially operating concern; we have to remain commercially
viable to remain in the market especially in the face of multinational
companies operating with their enormous resources.
Regarding rate of return on the
investments made in PSO, he said that total volume of business was
estimated at Rs 254 billion, which is equal to $4.23 billion.
Out of that the before tax
revenue was estimated at Rs 9.2 billion while after tax profit was Rs
5.4 billion. "See the level of investment and the size of the
profit earned after such a huge investment. Actually, we are not making
exorbitant profits. We have to compete with the multinational companies
for that you will have to be commercially viable," he observed with
a sense of satisfaction.