NEEDS OF MODERN PETROCHEMICAL COMPLEX
SHABBIR H. KAZMI
July 19 - 25, 2010
Pakistan hasn't succeeded in developing petrochemical industries partly because of lack of raw materials but mostly due to bad policies. At present, Pakistan's oil refineries are operating at around 50 percent capacity utilisation mainly because of production of limited products. However, the country remains dependent on imported high diesel and furnace oil. The situation prevails only because refineries have not been upgraded technologically.
Pakistan should have learnt from the experience of Singapore, a country which does not produce a drop of crude oil and yet has state of the art refineries working there.
Lately, some hopes were created with the ongoing talks for establishing three refineries in the country, but hopes are dieing with the passage of time. Pakistanis should feel lucky even if one refinery commences commercial production over the next five years. Discussion have been going on regarding establishing hydro and/or naphtha cracker for nearly four decades but nothing concrete has happened as yet. Parco is the only refinery established with the help of Middle East sponsors; else the track record is a little disappointing.
Lately, equity has been injected in Byco (formerly Bosicor Refinery) but the size and technology remains a big question. Attock Group can also take pride in having substantial exposure in Pakistan but they could have done a lot at a much faster pace.
POLYESTER STAPLE FIBRE
Till lately, Polyester Staple Fibre (PSF) was considered a product directly competing with cotton but now complementing it. With growing preference for blended fabric for ease in washing demand for manmade fibre is on the rise. Closure of Dewan Salman Fibre has created a temporary shortfall necessitating its import. While PSF manufacturers are demanding increase in duty, spinners are insisting on reduction in duty as local manufacturers are unable to meet the demand.
The first ever PSF plant was established in the country by a company also listed at the local stock exchanges, National Fibres Limited (NFL). With the shift in government policy towards liberalisation, deregulation and privatisation not only the private sector was allowed to establish PSF manufacturing plants but unit was also privatised and subsequently closed down by the acquirer. The growing demand encouraged establishing new units by the private sector as well as expansion by the operating units. Cognizant of the enormous growth potential, ICI Pakistan (which also owns and operates a PSF unit) also established
PTA MANUFACTURING PLANT
PTA is produced by using two basic petrochemicals i.e. PTA and MEG. While the country has been able to also export PTA, MEG is still imported. Lately, majority shares of PTA plant have been sold to a foreign strategic investor. Since then the operations of the company have improved.
Lotte Pakistan PTA was the single largest foreign direct investment of $490 million in Pakistan's petrochemical industry. In addition to its own manufacturing facilities, the company has helped to create a large infrastructure network at the Port Qasim, which includes a chemical jetty, raw material pipeline and manufacturing of industrial gases through third party contracts.
Globally there is growing emphasis on bio-fuel. While ethanol is added in motor gasoline, corn/canola oil is added in diesel to achieve greater reliance on renewable energy resources. Ironically, use of E-10 motor gasoline blended with 10 percent ethanol hasn't picked up due to resistance by oil marketing companies. One just can't think about adding corn/canola oil in diesel. Ideally, an additive becomes attractive when it is cheaper than the original fuel. In Pakistan, corn and canola oils are used as edible oil and sold at nearly double the price of diesel. Therefore, there is a dire need for bringing cost of corn and canola oil to around 30 percent of the current prices. Many experts are of the opinion that availability of CNG at very low price hasn't encouraged use of bio-fuel. With growing shortfall of natural gas, leading to closure of CNG stations once a week, motorists have to be convinced to use bio-fuel. However, consumers would only shift to a cheaper fuel.
Pakistan should work hard to produce bio-fuel at attractive prices, which would automatically help in bringing down edible oil prices in the country. Interestingly, corn could be cultivated at less fertile lands and canola is termed 'weed' international. Cultivation of corn and canola would not only benefit the country but would also improve the income of farmers.
Globally polyethylene is produced either from crude oil or fermentation of molasses. When crude oil prices went exceptionally low producing polyethylene from ethyl alcohol became uneconomical. However, with crude oil hovering above $75/barrel production of polyethylene (commonly known as plastic) has once again become economically viable. Pakistan has around 75 sugar mills many with attached distilleries. While only a fraction of alcohol produced in the country is being used to produce E-10 addition of polymerisation facilities can help in producing plastic and reduce its import bill.
Pakistan has no option but to upgrade its refineries to make them capable of producing value added products. Neighboring countries are also deficient in energy products and Pakistan can become 'energy corridor'. The objective can be achieved if country succeeds in establishing petrochemical complex based on state of the art technology. Buying obsolete technology may require less capital but would also produce low value added products. The choice is ours.