PAKISTAN NEEDS NEW REFINERIES TO MEET GROWING ENERGY REQUIREMENTS

KANWAL SALEEM, Lahore
Oct 22 - 28, 2007

In the wake of high economic growth rate in Pakistan, the country requires new refineries to meet the high economic growth rate. In addition to making efforts to increase refining capacity of present five refineries, efforts needs to be made to bring in foreign investment for setting up another oil refinery at Port Qasim.

Sources in the Ministry of Petroleum and Natural Resources told PAGE that efforts are underway to enhance Pakistan's oil refining capacity from six million tonnes to 13 million tonnes per annum with the setting up of new refineries to meet growing energy requirements in the wake of high economic growth rate.

According to the sources, the production of local oil refineries' registered a growth of 13 percent to 855,000 tonnes during the month of July 2007, as compared to 759,000 tonnes in July 2006. The statistics of Oil Companies Advisory Committee (OCAC) show the production of High Speed Diesel (HSD) enhanced by 10 percent, mainly due to better product margins in July 2007, whereas furnace oil (FO) production grew by 21 percent. During the period, local refineries produced only 46 percent of the total local demand for HSD and FO, owing to capacity constraint, while the rest was met through imports. These numbers exclude non-energy products like lubes, asphalt and other base oils.

The market sources said the smuggling of Iranian gasoline declined in the past months as the gasoline shortage became acute in Iran, which surged OMCs' gasoline intake from refineries. As a result OMC's production grew by 24 percent. However, the oil consumption growth in the country for the first month of 2007-08 stands at paltry 2.7 percent as compared to the pervious year of corresponding months. OMCs managed to handle total volumes of 1.57 million tonnes of POL products (except Lubricants and non-energy products) in first month of current fiscal year. Black Oil (Furnace oil and Light Diesel Oil) showed 4 percent growth this time, whereas White Oil products (MS, HSD, JP-1-8-4, HOBC and Kero) have initiated a positive growth of 1.4 percent on yearly basis.

Unfolding the history of oil refineries in this part of the sub-continent (now Pakistan), the analysts told this scribe the refinery business started when Attock Refinery began its operations in 1922 with a small capacity of 119 thousand ton per annum, which has now reached 1.82 million per annum. Attock Refinery Limited (ARL), situated in Morgah, Rawalpindi, was incorporated as a private limited company in November 1978 to take over the business of the Attock Oil Company Limited relating to refining of crude and supplying of refined products. ARL was then converted into a public limited company in June 1979 and is currently listed on all three stock exchanges. The company is also registered with Central Depository Company of Pakistan Limited (CDC). The sources said the ARL's configuration enables it to process the lightest to the heaviest indigenous crude and produce a complete range of both energy and non-energy products (Non-energy products include lubes and greases, asphalt, solvent oil, Mineral Turpentine (MTT), Benzene Toluene Xylene (BTX), jute batching oil, processing oil, carbon oil, and wax). ARL has already obtained ISO-9001 (2001), ISO-14001 (2002), and OHSAS 18001 (2006) certifications.

The second refinery-National Refinery Limited (NRL), the sources said was incorporated as a public limited company in Karachi in 1963 and government took over its management under the Economic Reform Order, 1972. NRL was privatized and management was handed over to new owner (Attock Oil Group) from July 7, 2005. The Attock Oil Group succeeded by offering the highest bid of Rs.16.415 billion to acquire 51% shares and management control of NRL. The Group is being represented through shareholding acquired by Pakistan Oilfields Limited (POL), Attock Refinery Limited (ARL) and Attock Petroleum Limited (APL).

In addition to a crude refining capacity of over 2.7 million ton per annum, the NRL has two lube refineries that have a combined capacity of 176,000 ton per annum of lube base oils (LBO) and a BTX unit that has a 25,000 ton per annum capacity. As the only refinery in Pakistan that produces LBO, the NRL enjoys a competitive edge over other refineries. The NRL has acquired certification under ISO 14001 for compliance with international standards on its environment management system, the sources added.

According to sources, Pakistan Refinery Limited (PRL), third in the country, was incorporated as public limited company in May 1960 and is listed at the Karachi and Lahore stock exchanges. The company is situated in Karachi and engaged in the production and sales of petroleum energy products as well as MTT, its only non-energy product. Its present design capacity is 2.1 million tons per annum. The majority of PRL's shares are held by its associated companies (PSO, Shell, Chevron, Central Insurance and Dawood Corporation), whose combined shareholding amounts to 69.3%. Financial institutions (9.4%), public sector companies and corporations (2.8%), individuals (14.7%) and joint stock companies, banks, development financial institutions, Modaraba companies, insurance companies and others (3.8%) hold the rest. PRL has been awarded ISO-14001 certification and occupational Health Safety Assessment Series (OHSAS) 18001 for maintaining its health, safety and environment (HSE) and quality control standards.

The fourth refinery--Pak-Arab Refinery Limited was incorporated in Pakistan on May 09, 1974 as a public limited company. The shares of the company are owned by the Government of Pakistan (GoP) and Abu Dhabi Petroleum Investment Company, LLC (ADPI), based in Emirate of Abu Dhabi, in the ratio of 60 percent and 40 percent, respectively. The company is engaged in refining, sale and transportation of petroleum products. Further, the company is undertaking the marketing of petroleum products (lubricants) under the brand name of "Pearl". The refinery of the company is situated at Mahmood Kot, District Muzaffargarh, the sources added. According to them, PARCO initially started as a pipeline operator, moving petroleum products from Karachi to Mehmood Kot and later on to Machike via Faisalabad. PARCO has commissioned another cross-country pipeline 817 Km, 26" diameter in November 2005. White Oil Pipeline is designed to carry up to 12 million tons per year of refined petroleum products from Karachi to Mahmood Kot, starting with initial throughput of 5 million tons per year.

A joint venture company called Pak-Arab Pipeline Company Limited was formed by PARCO having 51% share in collaboration with country's major Oil Marketing Companies (Shell, PSO and Caltex) having 49% share. In year 2000, PARCO's oil refinery, the largest in the country was commissioned, with a refining capacity of 4.5 million tons per annum. The company has an asset base approaching Rs. 100 billion. PARCO has entered into a joint venture agreement with Total of France for marketing its consumer petroleum products under the co-branding of Total-PARCO through a rapidly emerging national network of retail outlets.

PARCO is also marketing 25% of its LPG under the brand name 'Pearl Gas' in collaboration with SHV of Holland. In addition, PARCO also markets the imported lubes from OMV of Austria under the brand name of Pearl Lubes, and its locally blended lubes as Pearl Energy and Pearl Zabardast, the sources said, adding, Bosicor Pakistan Limited (BPL) was incorporated in the country as a public limited company on January 1995, and is quoted on the Karachi and Lahore Stock Exchanges. The principle business of the company is refining and marketing petroleum products. The refinery has a designed capacity of 1.5 million tonnes per annum. After the completion of its trial run form November 2003 to June 2005, the company started commercial production in July 2005 and can produce a wide range of petroleum products, including LPG and naphtha. It has a long-term sale and purchase agreement with the Pakistan State Oil Company (PSO) for the marketing of its products, the sources pointed out.