PAK-ARAB REFINERY LTD.

S.KAMAL HAYDER KAZMI,
(feedback@pgeconomist.com)
Research Analyst
, PAGE
Feb 6 - 12, 2012

Pak Arab Refinery Ltd (Parco) is an integrated energy company, and a key player in the country's strategic oil supply and logistics.

With a refining capacity of 100,000 barrels per day (BPD), combined storage capacity of over one million tons, a marketing joint venture with Total (France), a technical support venture with OMV (Austria), and a distribution agreement with SHV (Holland), Parco has emerged as the strategic fuel supplier to the country with a broad portfolio of operational ventures. The organization encompasses Pakistan's largest refinery and 2000 kms of cross-country pipeline network.

Parco is a joint venture between government of Pakistan and the Emirate of Abu Dhabi, incorporated as a public limited company in 1974. Sixty per cent of the share holding is by the government of Pakistan and 40 per cent by the Emirate of Abu Dhabi through its Abu Dhabi Petroleum Investment Company L.L.C. (ADPI), a subsidiary group of International Petroleum Investment Company (IPIC).

With continued support of the Emirate of Abu Dhabi, Parco has been able to realize a number of energy projects that have contributed significantly in enhancing the country's economic growth, saving foreign exchange, transferring technology and providing employment.

Parco has always been mindful of its responsibilities towards its customers, employees, the community, and the environment it operates in.

Parco has always actively stood by the nation in times of need to provide relief in calamity-hit areas. Realizing the devastation caused by the torrential rains, the company in coordination with a local NGO working in Badin, the rural uplift and welfare association (TRUWA), planned and distributed 250 dry ration packets amongst the flood-affected families of Allahbad, district Badin during 2011.

Rain affected families in the surrounding areas of Allahabad were provided these dry rations. The dry ration packets contain flour, cooking oil, sugar, daal and tea. These basic items would enable these calamity-hit families to survive till the water level recedes. Parco distributes dry ration amongst flood victims in Benazirabad, district Nawabshah.

Parco's mid-country refinery (MCR), pipeline division and corporate headquarters received triple IMS certification within a span of few months, validating its quality systems, environment concerns and employees' safety and security practices.

Striving for professional excellence has been a hallmark of Parco. MCR has the ability to produce around 1.2 mmt of furnace oil at 100 per cent capacity.

The power plants are the main consumers of furnace oil which constitute almost 88 per cent, while general trade comprises 12 per cent of the market demand.

Annual average general trade demand remains in the range of 70,000 mt per month, while the power plants (capable of dual fired system) are shifting from furnace oil to gas/coal.

Furnace oil comprises of approximately 30 per cent yield, therefore the uplifting of furnace oil is critical and requires regular stock movement to ensure sufficient ullage to run the refinery at a higher throughput.

The furnace oil consumption in power sector is a function of availability of gas and/or production of electricity through hydropower. The monthly variation in the furnace oil demand varies significantly.

Asphalt is produced through oxidation of furnace oil and has a substantial market in Pakistan. The production of asphalt provides the necessary flexibility to MCR for diverting its FO during the off-season since the product is low in demand.

However, there is also cost benefit to produce asphalt (a value added product) during high demand period depending on the price it fetches in the local market. The Engineering Design Specification (EDS) package for the Asphalt Plant has been awarded to an international contractor. The plant is designed to produce asphalt of international quality specifications and has the capacity to produce 500 M.Tons/day.

Recognizing and appreciating the HSE procedures and business processes, the Employers Federation of Pakistan has awarded Parco the "best practices award for occupational safety and health" for 2011, at a ceremony held in Karachi. The performance of the company can be judged by the fact that it has retained its AAA and A1+ long and short-term credit rating by Pacra for thirteen consecutive years. The company set another first when it obtained three simultaneous international certifications: ISO 9001:2008, ISO 14001:2004, and OHSAS 18001:2007.

Foreseeing the mounting demand of deficit POL products in Pakistan, Parco in alliance with International Petroleum Investment Company (IPIC) of Abu Dhabi, is endeavoring on a 250,000 bpd deep conversion refinery with a foreign direct investment of US$6 billion, at Khalifa point near Hub in Pakistan's province of Balochistan.

The IPIC and other UAE government institutions will have the majority of the shareholding i.e. 74 per cent shares in the project, whereas Parco will have 26 per cent of the holding.

The development of Khalifa coastal refinery at Khalifa point will be a strategic investment and will play a pivotal role in ornamenting the country's petroleum affluence.

With the construction of marine loading facilities to feed the refinery along with catering to export requirements, Khalifa point would also develop into another port proficient in handling liquid petroleum cargo. This would be significantly instrumental in supplementing the economic development of Pakistan in general and Balochistan in particular.