Attock refinery says will close in a week unless demand rises

KARACHI: Attock Refinery is operating its 54,000 barrels per day (bpd) plant at 29% capacity and is prepared to shut the complex in a week’s time if local demand does not recover, Reuters reported, quoting a senior company official.

If it closes, it would be the third Pakistani refinery to halt operations because of the collapse in demand as the country implements a lockdown to try to limit the spread of the novel coronavirus.

“The main plant is shut down. Only two small units are running and these will be closed in the next few days if the situation persists,” Adil Khattak, chief executive officer at Attock Refinery, told Reuters from the garrison city of Rawalpindi, where the refinery is located.

Pakistan’s energy ministry last week asked fuel retailers and refiners to cancel the import of products and crude from April. The government also asked the oil marketing companies that supply fuel stations to increase purchases from national refiners to try to ensure operations continue.

But on Saturday, Pakistan’s largest refiner Byco Petroleum Pakistan Ltd halted crude processing at its 155,000 bpd refinery because of “zero demand for products in the aftermath of COVID-19 lockdowns,” Shahryar Ahmad, its head of communications, said.

Byco, located on the outskirts of Pakistan’s largest city, Karachi, has put the refinery on cold circulation, which means crude is passed through the machinery without producing any refined products as fired heaters are shut.

The process would help in quick restart of refinery in case demand recovers, Byco said in a statement. Similarly, Pakistan’s National Refinery Ltd stopped crude processing at its 64,000 bpd plant from last Wednesday.

Meanwhile, oil sales are estimated to sharply drop 33 percent year-on-year and five percent month-on-month in March as consumption of diesel and furnace oil waned amid novel coronavirus-led lockdown, analysts said.

Oil sales were estimated at 1.1 million tons in March compared to 1.6 million tons in the corresponding month a year earlier. Furnace oil (FO) sales fell 62 percent year-on-year and 51 percent month-on-month in March to 70,000 tons. Diesel sales dropped 31 percent year-on-year, but rose six percent month-on-month to 395,000 tons.

Analyst Fawad Basir at Topline Research said oil consumption in the last 15 days of March was down an average 40 percent to 26,000 tons/day compared to an average consumption of 46,000 tons/day, “which is due to the lockdowns announced by the provinces to control the outbreak of COVID-19”.

“Ex-FO performance did not fare well either as 29 percent year-on-year decline was likely. The slight uptick in FO volumes was witnessed in January 2020 has quickly disappeared with declines of 33 and 51 percent month-on-month in February and March 2020, respectively.”

The lockdowns imposed during the last week of March to contain the spread of novel coronavirus would play a key role in the weak.

In March, sale of motor spirit (MS) fell 13 percent year-on-year to 560,000 tons, though it rose two percent month-on-month.

Analyst Ali Zaidi at JS Global Capital said a significant decline in FO offtake and decline in sales of other products was expected to depress overall sales despite that MS and HSD demand was expected to pick up.

Given the broader declining trend of oil sales seen over the past few months, analysts expected the yearly impact to be much more pronounced. Brokerage estimates suggest overall oil sales would decline 13 percent to 12.3 million tons in the first nine months of the current fiscal year of 2019/20, led by double-digit declines in HSD and FO. On the other hand, MS sales are expected to remain flattish during the period. Moving forward, overall petroleum sales are likely to remain depressed until the lockdowns are lifted. Until such a time, the reduction in retail fuel prices recently announced by the government might not have material impact on the demand.