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Business

March 10, 2018

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Refineries plan $2.5 billion in investment to convert FO into gas

KARACHI: Oil refineries are planning $2.5 billion in technology investment to convert furnace oil into motor gasoline and diesel as the fuel-based power plants are being phased out, industry officials said on Friday.

The officials said refineries will upgrade their facilities and around $2.5 billion is estimated to be invested in the sector within the next couple of years.

“Byco will take the lead and be the first to install the technology that would convert furnace oil into motor gasoline and diesel,” Asad Azhar Siddiqui, vice president of Byco said. “There are several technologies to convert furnace oil, and Byco would install fuel catalytic cracker, which produces more amount of motor gasoline.”

An official said though the technology costs around $700 million, all the five refineries, including Pak-Arab Refinery, National Refinery, Pakistan Refinery, Byco Petroleum Refinery and Attock Refinery Limited should make the investment one day or other to survive.

In October last year, government banned new power plants based on furnace oil in the wake of a growing import of comparatively inexpensive liquefied natural gas (LNG). The country has currently two LNG terminals with a production capacity of 1.2 billion cubic feet/day, which is quite a relief for the country facing a gas shortfall of around two billion cubic feet/day.

An official said refineries got trapped in an operational crisis due to government’s inefficiency and poor planning. “Sudden closure of power plants had brought petroleum refineries on the verge of closure as their furnace oil supplies plunged to zero and storages were filled to the brim,” the official added. “With no storage capacity, oil refineries were forced to stop production of furnace oil as well as other petroleum products.”

Profits of refining sector declined around 50 percent in the last quarter of 2017.

Furnace oil sales fell 26 percent to 6.04 million tons in the first eight months of the current fiscal year of 2017/18.

Byco has 40,000 tons of furnace oil in stock and the company is also concerned about the off-take of their throughput.

“Furnace oil demand would further decline after the summers in September posing grave challenges to the sector,” an official said.

Byco has an installed capacity of 155,000 barrels per day. Currently, the refinery is operating at 50 percent capacity. After an incident in 2015, Byco’s refining complex-II has restarted operations.

Siddiqui said Byco sought permission from the government to install two more single point mooring, as the company plans to increase refining capacity to 450,000 barrels per day by 2025.

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