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September 6, 2018

Manganese eradication from petrol to cost refineries Rs55 bn a year


September 6, 2018

ISLAMABAD: The government's decision in May to phase out the use of manganese additives in petrol has prompted oil refineries to reduce their production of petroleum products, causing potential losses of Rs55 billion a year, according to a letter written to the Petroleum Division by the Pak-Arab Refinery Ltd (Parco).

The letter, addressed to the Director General Oil, said the decision to phase out metallic additives in petrol in accordance with impractical timelines was damaging to the refinery industry because its advice was ignored.

The refinery industry wanted the maximum level of manganese additive set at 54mg per litre, whereas a government notification on May 24 immediately imposed a limit of 40mg per litre in petrol bearing the octane numbers (RON) 90, 92, 95 and 97. It would further be reduced to 24mg per litre in October. From November to April next year, the limit of manganese in 95 and 97 RON petrol would be set at 10mg per litre. After that, it would be completely banned by the Government of Pakistan.

According to the Parco letter, a copy of which has been obtained by The News, the imposition of the 40mg per litre manganese limit would result in a marked decline of motor gasoline production, leading to a 5 percent reduction in refinery throughput. The production loss would cost Parco about Rs17 billion a year, while increasing Pakistan's reliance on imported petroleum products.

The subsequent reduction of manganese additive to 24mg per litre from November would cause a further 10 percent reduction in the Parco refinery's output at a cost of some Rs34 billion a year, while the overall losses sustained by refineries in Pakistan would rise to Rs55 billion a year.

In its letter, Parco argued that the limit of Manganese should be set at 54mg per litre of 90/92 RON petrol, as earlier recommended by all refineries, and should remain in force until the refineries were able to upgrade their processing facilities. The timelines should be worked out after consultation with all stakeholders, especially all local refineries.

Pakistan's refineries would need to invest $8 billion to upgrade their processing facilities over five years.

Parco contended that manganese was previously not included in Pakistan's specifications for motor gasoline. It came under review due to a complaint registered by Honda about the effect of the additive on the engine of its Civic 1.5 VTEC turbo model, which has since been withdrawn from the market. If the sale of this model had continued, its numbers would have constituted a negligible percentage of the total car population. High-end vehicles can use imported grades of 95 or 97 RON petrol, which contains lower levels of Manganese and is widely available in Pakistan.

Meanwhile, Ilyas Fazil, chief executive of the Oil Companies Advisory Council (OCAC), has also written to the Petroleum Division to complain that the DG Oil of the Petroleum Division allegedly fudged the minutes of the May 24 committee meeting, after which he issued the notification to phase out metallic additives in petrol.

Ilyas said that the Petroleum Division issued the notification without drawing on the consensus agreement reached with stakeholders at the meeting. He said the committee agreed on the completion of a study into metallic additives before November.

However, it did not decide that the reduction of additive levels would come into force before a final decision was taken. The committee agreed to allow existing permitted levels of Manganese to be used until then, while no decision on the reduction and subsequent phasing out of the additive had been taken, Fazil wrote.

The official is currently in Saudi Arabia after performing the Haj pilgrimage and was not available for comments.

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