WHY PARCO MEANS ENERGY
Feb-25 - Mar- 10, 2002
PARCO'S CORPORATE VOYAGE: PAK-ARAB REFINERY LIMITED (PARCO) has now been in existence for more than 25 years. Its corporate voyage through these years has been studded with important milestones. In the past 10 years PARCO has grown in size and strength and looks with confidence to an even brighter future. Incorporated as a public limited company in 1974, PAK ARAB REFINERY LTD is a joint venture between the countries of Pakistan, Abu Dhabi and Austria. The share holding in the joint venture is in the proportion of Government of Pakistan 60% and ABU DHABI Petroleum Investment (ADPI) 40%.
PARCO is truly an Energy Company: PARCO is actively involved in various facets of oil storage, transportation, refining, marketing and export of fuel products. It serves as the lifeline in the transportation of fuel supplies in the country and represents more than 40% of its refining strength. It has the most comprehensive oil pipeline and storage network with a state-of-the-art, modern refinery with leading edge technology and processes. Commissioned in the year 2000, a full month ahead of schedule and within the approved budget of US$ 886 million, the sensibly located Mid Country Refinery was formally inaugurated by the President of Pakistan in February 2001. The refinery is of great significance to Pakistan's economy. Besides being the critical inland supplier to the high growth areas of the middle and northern consuming centres of the country, PARCO assists with the balance of payments of the country. It helps to substitute imports of refined value added oil products to the tune of $100 million annually and additionally another US$ 100 million through exports of quality unleaded Motor Gasoline and soon Liquefied Petroleum Gas to international buyers.
PARCO is a fulcrum and key building block in the country's strategic oil supply and availability dynamics. With the synergy of a comprehensive and expanding oil pipeline network integrated with a significant and modern refining capability, PARCO has emerged as the strategic fuel supplier to the country.
PIPELINE SYSTEMS: PARCO's primary role in the last 26 years has been transportation of petroleum products on behalf of Oil Marketing Companies (OMC's) from Karachi to Mahmood Kot near Multan and to Faisalabad and Machike near Lahore through its 1,230 kms pipeline. PARCO's Pipeline Systems include a combination of linked systems that constitute the network that is continuously monitored through the deployment of highly sophisticated telecommunication facilities and a comprehensive Supervisory Control and Data Acquisition (SCADA) system.
Since commissioning in 1981, the pipeline has transported over 59 million tons of oil products from the coast of Karachi to upcountry which otherwise would have been dependant on the cumbersome and time-consuming road and rail transport. PARCO's pipeline has thus become a vitally critical and efficient life support system for the central and northern areas of the country, while contributing to the national exchequer not only through payment of attractive dividends, taxes and import duties but also by delivering major savings in freight pool expenses. It has also helped achieve considerable savings in foreign exchange and has created additional employment opportunities in the country.
MID COUNTRY REFINERY (MCR): The Mid-Country Refinery (MCR), which is PARCO's shining jewel in the crown and raison d'etre of the company, remained only an idea till a few years ago. It is noteworthy that this idea has been translated into an on-the-ground reality and stands today as a proud testimony to PARCO's perseverance, steadfastness and professional capabilities. The PARCO Mid Country Refinery formally commissioned in February, 2001 at Mahmood Kot, comprises a grass root refinery complex of main Process Units, treatment and recovery units and full range of Offsite /Utilities System. It also includes a new residential colony that provides modern housing facilities and leisure amenities for more than 800 residents.
The Refinery plate capacity is around 4.5 million tons per annum equivalent to a processing throughput of 100,000-barrels/ day of a mixed Arabian Light/ Upper Zakum/ crude slate, which is being transported to the Refinery site by PARCO's Keamari to Mahmood Kot pipeline system from Karachi. The city of Multan, only 65 km, makes for good access from the Refinery with the national communications network of rail, road and air.
TECHNOLOGY TRANSFER: The establishment of the Mid Country Refinery is truly an exceptional undertaking and it has set a much-needed precedent due to its unique locational and technological features. The fact that this long-awaited project has finally materialized may be accredited to the commitment and dedication of Pakistani engineers and workers and the top decision-makers in the country, who have overcome various economic hurdles and proven that, if there is a will, such mega projects can find the way to become a reality in Pakistan.
PARCO's Mid Country Refinery can also be considered a demonstration of the resilience of Pakistani people, its engineers and skilled staff who have in turn developed confidence through the validation of their own abilities by putting up such a mega project. The 26 local contractors working on the project were accorded a unique opportunity to work under the supervision of international contactors which upgraded their skills at both the national and international levels.
As a matter of fact, the successful completion of the project, ahead of schedule, and without any cost over-runs, is a testimony to the ingenuity of these Pakistani technical and commercial entrepreneurs, which ought to be extremely reassuring for any investor or financier of infrastructure projects in the country.
PRODUCT: The following products are currently being produced by PARCO's Mid-Country Refinery
MS (87 RON), MS (90 RON), HSD, KEROSENE, JP-1, FO, LDO, JP-4, LPG, CRUDE
With PARCO's Mid-Country Refinery, the country's indigenous refining capability has almost doubled and is providing the flexibility of balancing and tailoring production of refined products, in line with the consumer demand, and product supply with respect to imports. The Refinery has optimized product supply logistics and ensured efficient and economic availability of petroleum products to the central and northern regions of the country, which account for over 60% of the country's total requirement. With a production capacity of 4.5 million tons per annum, the refinery has through import substitution of petroleum products accrued foreign exchange savings of $ 100 million per year besides helping improve and streamline the transportation logistics of the country.
MARKETING OF PETROLEUM PRODUCTS: As a dynamic organization, ready to adapt to a rapidly changing environment, PARCO has quickly moved to enter into marketing of its own petroleum products. Having developed and extended its cross-country pipeline system and storage facilities and having made a significant investment of US $886 million in the MCR, it was logical for PARCO to integrate even further by taking its value-added product to market. Further, the coming-on-stream of the refinery, positions PARCO ideally to be self reliant in producing quality backed products and winning customer acceptance and loyalty. For example PARCO is already producing lead-free gasoline which is the accepted world standard for cleaner fuels. Therefore, PARCO is moving to create its own market franchise through international linkages and co-marketing arrangements that will fully potentialise the competitive advantage of an integrated energy company like PARCO.
MARKETING PARTNERSHIPS: Collaborations add strength through diversity, as may be seen from the example of PARCO and the role it plays in the petroleum industry of Pakistan. PARCO's performance is a result of the collective strength and wisdom of the collaboration between the Ministry of Petroleum of Pakistan, ADPI of Abu Dhabi and OMV of Austria.
Similarly, the partnerships undertaken with the TOTAL FINA ELF as well as SHV have proven to be both productive and beneficial. For the disposal of 25% production of the PARCO refinery, the company has entered into a joint venture with the international petroleum conglomerate TOTAL, FINA ELF. A distribution and marketing network, under the brand name of PARCO TOTAL, is currently being developed all over Pakistan. The first branded petrol station for consumer retailing of fuel products has just been commissioned near Sargodah, to be followed by 30 during 2002 and 450 over the next 15 years.
The collaboration with the Dutch company, SHV also entails a Technical Services Support Agreement, whereby LPG is being supplied to customers under the brand name of Pearl Gas; thus enabling 25% of the PARCO refinery LPG to be co-marketed. As may be seen, both these ventures have been value adding for PARCO, as they have enabled the company to distribute 25% of its refinery products through a country-wide distribution and marketing network, whilst concurrently attracting into the country International standards and expertise of such multi-nationals to add value to the local supply chain and distribution. It may be noted that collaboration has also been rewarding for both TOTAL FINA ELF and SHV when they joined hands with PARCO. They have naturally gained from the experience, strength and good will of a company that has been successfully operating as the strategic infrastructure backbone of the petroleum industry for the last quarter of a century in Pakistan.
PEARL: Quality & Value: PARCO is also engaged in independently marketing activities through development and establishment of the brand identification of 'PEARL.' The word 'PEARL' is associated with qualities like purity and being precious, which translates into a positioning for the brand as offering quality and value in petroleum products. The depiction of a 'PEARL' logotype helps create the brand identification for the marketing of products and services including fuel products, lubricants and LPG.
• Sulfur upliftment commenced in May 2001 and currently totals around 7,000 M. Tons.
• Since December 2000, LDO and Fuel Oil have been marketed through agents under the PEARL brand.
LPG: MCR as part of its refining activity ends up producing about 150,000 metric tons of LPG every year as a by-product. PARCO is marketing this alternative fuel under the brand name of 'PEARL Gas'. PARCO has entered into a Technical Service and Support Agreement (TSSA) with the Dutch company SHV for the marketing of 25% of the production. The remaining 75% has already been allotted to the existing licensed local LPG marketing companies.
LPG EXPORT: Historically there was a constrained demand of LPG in the country due to supply limitations from indigenous sources, lack of suitable import infrastructure and generally high international prices. It was in the recent past that some LPG had started coming into the country through sea/land routes. In pre-PARCO period the total supply of LPG from all sources including imports was around 200,000 tons. The commissioning of PARCO's Mid Country Refinery has brought significant changes not only in the supply pattern and LPG logistics of the country but has added another 150,000 tons of LPG to the national availability, which is 75% of pre PARCO supply. Thus the total indigenous supply has increased to around 320,000 tons. However, due to limited storage, logistic, distribution and marketing infrastructure of the LPG marketing companies, in addition to conventional and narrow consumer base, it is expected that all of the additional LPG supplies available from PARCO Mid-Country Refinery and other indigenous sources may not be absorbed indigenously.
Under the current post-PARCO market conditions (which are highly sensitive to seasonal variations) and available distribution infrastructure/facilities, around 40,000-50,000 tons of LPG may remain surplus, at least for a period of 1 - 2 years, thus allowing for export. It is therefore important that to prevent this national resource from being wasted/degraded alternate markets are searched and export potential is fully explored. There is a large export market of LPG, which includes countries like India, Sri Lanka, Bangladesh and Afghanistan etc. The infrastructure needed for Export of LPG is available with Engro Vopak Terminal, Port Qasim, where around 4,500 tons of storage capacity is available. A limited transportation fleet would be the major bottleneck for achieving a target of 50,000 tons export. Considering the present availability of bowsers, it may be possible to transport only 3,000-3,500 tons of cargo in a month to EVTL facilities. Thus the maximum volume of LPG that can be exported, using the sea route, could be around 30,000 tons in a year. To maximize the quantities, the transport fleet would need to be augmented. PARCO is confident that increased business opportunity will be a catalyst in helping the transportation fleet to grow rapidly in order to accommodate the 50,000 M. Tons/ annum export target.
Lubricants: PARCO has made arrangements to market automotive and industrial grade lubricants under an agreement that has been entered into with a leading Austrian origin European company, OMV. PARCO is marketing these specially formulated lubricants for the local climatic and road conditions in Pakistan under the brand name of 'PEARL LUBES' through a network of dealers and outlets.
WHITE OIL PIPELINE PROJECT (WOPP): White Oil Pipeline Project (WOPP) is the next mega infrastructure project being implemented by PARCO. After the conversion of PARCO's existing pipeline network for crude oil transportation, the White Oil Pipeline will transport refined petroleum products to the central and northern regions of Pakistan; which account for almost 60% of the total petroleum consumption in the country. PAPCO, or Pak-Arab Pipeline Company will be laying the 817 km White Oil Pipeline from Karachi to Mahmood Kot at a cost of around US$ 480 million. With the up-country demand for petroleum products increasing at a rate of 10% per annum, the total demand in the northern region is expected to increase to 10 million tons in the near future. The White Oil Pipeline is being designed for a capacity of 12 million tons per year, starting with 5 million tons in the initial years. The project is being implemented by the new joint venture called Pak-Arab Pipeline Company (PAPCO) in which PARCO has 51% equity and the remaining 49% is being shared by Shell (26%), PSO (12%) and CALTEX (11%).
Vision and Future: PARCO's vision is to be the national strategic supplier of petroleum products to the country. Being a premier oil sector company that continues to integrate its growth into existing operations, PARCO has been able to achieve a synergistic downstream focus. It aspires to plan and execute its future growth and development to be holistic in nature to support its national role. This will mean that all diversification will allow continued integration and be viable to make solid business sense. It is expected that these developments will continue to benefit from PARCO's core asset base of people and investment employed towards a better tomorrow for all its stakeholders.
With strategic decisions on diversification and cultivating organic growth, PARCO is rapidly moving towards transforming itself into a fully integrated energy company. PARCO's discrete areas of competitive advantage will allow it to achieve excellence in energy transportation through pipeline operations and management, strategic storage, leading edge refining and incisive marketing of petroleum products through both retail and exports.
As a model joint venture, PARCO is a symbol of multinational cooperation for the growth and prosperity of Pakistan.