Staff Report
ISLAMABAD:
The managing directors (MDs)/Chief Executive Officers (CEOs) of the refineries are scheduled to meet with officials of petroleum division on 11th October, 2021 to take up draft Pakistan Oil Refining Policy 2021
Petroleum Division’s Directorate General of Oil, in a letter dated 8th October, 2021, has requested heads of Pak Arab Refinery Limited, Pakistan Refinery Limited, Byco Petroleum Pakistan Limited, Attock Refinery Limited and National Refinery Limited to attend the meeting which would be held on 11th October, 2021. The meeting would take up draft Pakistan Oil Refining Policy 2021- incentives for existing oil refineries.
It is also learnt from sources that all five refineries of the country are currently in need of financial support from the government to improve their financial position for up-gradation purposes. Similarly, the petroleum products demand-supply projections have indicated a requirement of the additional refining capacity of at least 300,000 barrels per day (bpd) at a cost of USD10-15bn by 2030. This would require a considerable lead time and huge investment for which clear government policy along with attractive incentives need to be in place, said sources.
Sources said that petroleum division has now called a meeting with heads of refineries to discuss and review the proposed incentives for the existing refineries of the country. They said the petroleum division, after consulting the relevant stakeholders, is to submit a draft Pakistan Oil Refining Policy 2021- incentives for existing oil refineries during the next CCoE meeting for necessary approval. It is hoped that next CCoE will grant its approval regarding proposed incentives for the existing five oil refineries of the country, said sources.
They added that after CCoE’s approval, the new oil refining policy 2021 will be laid before federal cabinet for final approval.
As per details, the Cabinet Committee on Energy (CCoE) had approved the Pakistan Oil Refinery Policy 2021 in principle during last month of September 2021. However, CCoE directed the Petroleum Division to revisit the upfront incentive package offered to the existing refineries in the country.
Petroleum Division had earlier presented a summary of Pakistan Oil Refinery Policy 2021 for approval of CCoE. The proposed policy was discussed in detail. The chairman of the committee (CCoE) appreciated the work and efforts of the Petroleum Division and of the highly knowledgeable and experienced professional involved in the formation of this policy. The CCoE approved the Pakistan Oil Refinery Policy 2021 in principle. However, it directed Petroleum Division to revisit the upfront incentive package offered to the existing refineries in the country.
The Petroleum Division also informed the CCoE that the new oil refining policy 2021 had been devised to attract investment for increased indigenous production of refined products, reduce import bill and ensure foreign exchange savings, besides providing environment-friendly quality product of international level.
CCoE, during its previous meeting, reviewed the summary and directed that the petroleum division reassess the policy in light of the following observations.
1: The possibility of upfront tariff protection benefits for existing refineries that choose to upgrade.
2: To limit the role of government and to simplify the monitoring method
3: Handling of tariff protection incentives from July 1 to December 31, 2021.
Sources said that the government has been emphasizing refineries to produce Euro-V specification fuels and the proposed oil refining policy 2021 is likely to provide incentives for up-gradation of existing refineries to produce Euro-V specification products as well as encourage potential investors to establish a new state of the art deep conversion refineries through fiscal support.
“The existing refineries have progressively upgraded their infrastructure, however, due to high capital requirement, lack of tariff protection and low returns on investment, the existing refineries could not keep pace with the technology around the world,” said the sources.
They added that a huge capital investment of around USD2-3.5 billion is required for producing Euro-V specification products which can only be arranged by the refineries from lending institutes at commercial terms.
Petroleum products contribute 31 per cent of the primary energy mix of the country with overall consumption of around 20 million tons per annum (MTPA). Out of this, the indigenous production is around 11 MTPA while deficit petroleum products of 9 MTPA is imported. The deficit crude oil and petroleum products are imported from Saudi Arabia, Abu Dhabi (UAE), Kuwait and open markets of the Gulf and Southeast Asia regions among others.
The indigenous and imported crude is refined by five major refineries. Currently, five players are operating in the oil refining sector in Pakistan including, Pak-Arab Refinery Limited (PARCO), Attock Petroleum Limited (ARL), National refinery Limited (NRL), Pakistan Refinery Limited (PRL) and Byco Petroleum Pakistan Limited (BPPL). All the refineries are hydroskimming refineries, except for PARCO which is a mild-conversion refinery. However, four out of five refineries are based on old technologies such as hydroskimming. The fifth refinery i-e Pak Arab Refinery Limited (PARCO) is using semi-conversion technology which is also more than twenty years old. These refineries have up-graded their plants during 2015-18 and installed Diesel HydroDesulfurization (DHDs) for producing Euro-II specification High-Speed Diesel (HSD) and Isomerization plants for enhancing the production of Motor Spirit (Petrol) at a cost of around Rs 75bn.
