Pakistan's private sector refiners are likely to invest nearly $1 billion over the next three years to expand their plants and also produce Euro 2 compliant high speed diesel, a refinery chief said last week.
"The government has asked all the [private] refiners in Pakistan -- Attock Refinery, National Refinery, Pakistan Refinery and Byco [formerly known as Bocior] -- to reduce sulfur content in high speed diesel to meet Euro 2 [specifications] by June 30, 2014," said Adil Khattak, CEO of Attock Refinery. The refinery is located at Morgah, 30 kilometers (18.6 miles) from the capital Islamabad.
In Pakistan, diesel from the refiners currently has about 1% sulfur content, which is equal to 10,000 ppm, while imported diesel is about 0.5% sulfur, or 5,000 ppm. Euro 2 specifications call for lowering the sulfur content to 500 ppm, or 0.05%.
"We are working fast on the said directive of the government to meet Euro 2 specifications," Khattak said. "In my calculation, the four refineries would need nearly $1 billion to complete this task."
Pakistan's other refining company -- and the largest -- is the Pak Arab Refinery Company, or Parco. The joint venture between the government of Pakistan (60%) and Abu Dhabi (40%) has a refining capacity of 4.5 million mt/year (90,000 b/d).
Overall, Pakistan has a refining capacity of 12.9 million mt/year (about 259,000 b/d), with National Refinery contributing a nameplate capacity of 2.7 million mt/year (54,000 b/d), Pak Refinery 2.1 million mt/year (42,000 b/d), Attock Refinery 1.9 million mt/year (38,000 b/d) and Byco 1.7 million mt/year (34,000 b/d).
Attock Refinery plans to expand its capacity by almost 11,000 b/d to 53,000 b/d while carrying out its upgrade, Khattak said.
"There has been immense potential in Pakistan to expand the refineries as the deficit is huge between refining and demand," he said.
Pakistan's current demand is around 20 million mt/year while its refining capacity is around 13 million mt/year.
The country's import bill for crude and refined products was around $10 billion in the year ended June 30, 2011.
"Despite these known facts, the authorities are sleeping, forcing the country to import costlier petroleum products to feed local demand," Khattak said. CIRCULAR DEBT HINDERS REFINING OUTPUT
Also, state-run companies not paying for oil, gas and electricity purchases has affected the financial health of oil marketing, refining, gas and exploration companies.
Refineries were only operating at 70-75% of capacity, he added. The circular debt problem has disrupted the flow of petroleum products from explorer and producer to refiner, oil marketing companies and end users, mostly electricity producers using furnace oil, he said.
Pakistan State Oil, for example, currently owes Pakistan Rupees 19 billion ($222 million) to Attock Refinery, which in turn will have to halt its purchase of crude oil from explorer and producer Oil and Gas Development Co.
As of October 3, Attock Refinery has stopped shipping out oil products to PSO, which owes about Rupees 83.4 billion to international suppliers and about Rupees 71.7 billion to the five domestic refiners. PSO said this week that it had received Pakistan Rupees 10 billion in payment from state-run and private electricity producers, but it is still owed about Rupees 116 billion.
The financial crisis has left state-run refineries, oil marketing companies, electricity producers and gas companies unable to pay for oil and gas purchases, resulting in outstanding bills along the supply chain that total around around Rupees 325 billion.
This debt problem has affected the liquidity of local exploration and production companies, restricting drilling activity.
"The government has asked all the [private] refiners in Pakistan -- Attock Refinery, National Refinery, Pakistan Refinery and Byco [formerly known as Bocior] -- to reduce sulfur content in high speed diesel to meet Euro 2 [specifications] by June 30, 2014," said Adil Khattak, CEO of Attock Refinery. The refinery is located at Morgah, 30 kilometers (18.6 miles) from the capital Islamabad.
In Pakistan, diesel from the refiners currently has about 1% sulfur content, which is equal to 10,000 ppm, while imported diesel is about 0.5% sulfur, or 5,000 ppm. Euro 2 specifications call for lowering the sulfur content to 500 ppm, or 0.05%.
"We are working fast on the said directive of the government to meet Euro 2 specifications," Khattak said. "In my calculation, the four refineries would need nearly $1 billion to complete this task."
Pakistan's other refining company -- and the largest -- is the Pak Arab Refinery Company, or Parco. The joint venture between the government of Pakistan (60%) and Abu Dhabi (40%) has a refining capacity of 4.5 million mt/year (90,000 b/d).
Overall, Pakistan has a refining capacity of 12.9 million mt/year (about 259,000 b/d), with National Refinery contributing a nameplate capacity of 2.7 million mt/year (54,000 b/d), Pak Refinery 2.1 million mt/year (42,000 b/d), Attock Refinery 1.9 million mt/year (38,000 b/d) and Byco 1.7 million mt/year (34,000 b/d).
Attock Refinery plans to expand its capacity by almost 11,000 b/d to 53,000 b/d while carrying out its upgrade, Khattak said.
"There has been immense potential in Pakistan to expand the refineries as the deficit is huge between refining and demand," he said.
Pakistan's current demand is around 20 million mt/year while its refining capacity is around 13 million mt/year.
The country's import bill for crude and refined products was around $10 billion in the year ended June 30, 2011.
"Despite these known facts, the authorities are sleeping, forcing the country to import costlier petroleum products to feed local demand," Khattak said. CIRCULAR DEBT HINDERS REFINING OUTPUT
Also, state-run companies not paying for oil, gas and electricity purchases has affected the financial health of oil marketing, refining, gas and exploration companies.
Refineries were only operating at 70-75% of capacity, he added. The circular debt problem has disrupted the flow of petroleum products from explorer and producer to refiner, oil marketing companies and end users, mostly electricity producers using furnace oil, he said.
Pakistan State Oil, for example, currently owes Pakistan Rupees 19 billion ($222 million) to Attock Refinery, which in turn will have to halt its purchase of crude oil from explorer and producer Oil and Gas Development Co.
As of October 3, Attock Refinery has stopped shipping out oil products to PSO, which owes about Rupees 83.4 billion to international suppliers and about Rupees 71.7 billion to the five domestic refiners. PSO said this week that it had received Pakistan Rupees 10 billion in payment from state-run and private electricity producers, but it is still owed about Rupees 116 billion.
The financial crisis has left state-run refineries, oil marketing companies, electricity producers and gas companies unable to pay for oil and gas purchases, resulting in outstanding bills along the supply chain that total around around Rupees 325 billion.
This debt problem has affected the liquidity of local exploration and production companies, restricting drilling activity.
Meanwhile, Khattak said that part of the refinery upgrade and expansion includes the extraction of gasoline from naphtha because of Pakistan's increasing demand for transport fuels.
Earlier, around 10-15% of the country's gasoline demand was met through smuggled petrol from Iran. But with Iran having "eliminated a subsidy, making the product unviable for smuggling" Pakistan has a problem, Khattak said.
"Moreover, demand in Pakistan has increased following a rise in car sales, especially among farmers on good wheat, sugarcane and cotton crops," he said.
Pakistan consumes around 250,000 mt of petrol a month, according to data collected so far for the 2011-12 fiscal year that started July 1, against about 200,000 mt/month a year ago.
The government has said any refiners meeting the target of being able to produce diesel to Euro 2 specifications by June 30, 2014, will get Rupees 1 for each liter of high speed diesel sold, until such time that the cost of the upgrade is recovered.
The refineries had been asking for an incentive of Rupees 2.50-3/liter, Khattak said.
Earlier, around 10-15% of the country's gasoline demand was met through smuggled petrol from Iran. But with Iran having "eliminated a subsidy, making the product unviable for smuggling" Pakistan has a problem, Khattak said.
"Moreover, demand in Pakistan has increased following a rise in car sales, especially among farmers on good wheat, sugarcane and cotton crops," he said.
Pakistan consumes around 250,000 mt of petrol a month, according to data collected so far for the 2011-12 fiscal year that started July 1, against about 200,000 mt/month a year ago.
The government has said any refiners meeting the target of being able to produce diesel to Euro 2 specifications by June 30, 2014, will get Rupees 1 for each liter of high speed diesel sold, until such time that the cost of the upgrade is recovered.
The refineries had been asking for an incentive of Rupees 2.50-3/liter, Khattak said.