close
Sunday June 26, 2022

Pakistan Refinery plans $1.2bn expansion

May 22, 2022

KARACHI: The Pakistan Refinery Ltd (PRL) will spend around $1.2 billion for the upgrade and expansion of its operational capacity, a top official said on Saturday.

“The PRL will expand its capacity by doubling it to 100,000bpd from the current nameplate of 50,000bpd, while converting to deep conversion from the existing hydro skimming,” said Zahid Mir, Managing Director & CEO of PRL talking to The News.

“Rest of the refineries will upgrade their units to meet Euro V specification products, while substantially reducing the production of furnace oil, and are expected to be completed in five years.”

Mir said following the completion of upgrade and expansion, the production of furnace oil would significantly fall from the existing 30 percent and output of diesel and motor gasoline would substantially increase.

He said currently there were five refineries in operation in Pakistan with annual capacity of 3 million to 3.2 million tonnes of furnace oil.

“Other refineries have different plans to upgrade and hence the cost would vary from refinery to refinery.”

The GRMs (Gross Refinery Margins) are different for different refineries and are based on the nature of crude and the yields. International cracking margins for diesel and petrol have improved in the recent months; currently hovering around $30/barrel from $5 last year providing opportunity of windfall profits to the Pakistani refineries offsetting years of heavy losses.

“Pakistan reliance on local refineries is limited and import dependence is still higher,” the industry official said and added that refineries upgrade, expansion was highly capital intensive and need government incentives to justify huge investments.

“The government is working on a policy to encourage upgradation of the existing refineries and investment in a new refinery and is expected to be approved soon," Mir said.

Refineries usually suffer higher inventory problems during the winter season when the furnace oil demand dries up due to reduction in electricity demand as power plants using furnace oil stop operations and the electricity generation relies on cheaper fuels such as coal, gas, RLNG and nuclear, creating operational issues at the refineries.

However, currently the fuel oil demand is very high and apart from the local production huge quantities are being imported by Pakistan State Oil.

The average throughput of all Pakistani refineries currently stands around 75 percent, which last year was around 60 to 65 percent, according to an industry analyst.

Currently the demand for petroleum products is high including the furnace oil. The demand for diesel and petrol increased by about 20 percent in the first nine months compared to previous year, while import cost has almost doubled because of higher prices.

Comments