Gross refinery margins rise to $37/bbl in May

KARACHI: The gross refinery margins (GRMs) of the oil industry have risen sharply to $37/barrel in May 2022 against $24/barrel in April of this year, the latest data showed.

Though the GRMs for the local refining sector may seem strong in May, the annual margins are however hovering around $10-12/barrel, which are anything but robust.

“May’s GRMs look appealing but the overall average GRMs for the entire year didn’t surprise on the upside,” said Zahid Meer, Chief Executive Officer Pakistan Refinery Limited (PRL), while talking to The News.

“Whatever profit is earned from high GRMs is not utilised by refineries but goes to a reserve fund under a government policy.”

Also, Meer said, this profit couldn’t be utilised for offsetting previous years’ losses and were not given out in dividends beyond ten percent.

“Refineries have been a loss-making sector and last twenty years’ figures show refineries have incurred a loss of Rs62 billion compared to oil marketing companies, which earned Rs219.85 billion profit,” he said.

Meer said just in the case of PRL, its total loss was around Rs17.5 billion.

“Though it earned a profit of Rs5.50 billion in the last fiscal, it can’t be used to offset the accumulated losses and these earnings went to the reserve fund”.

Meer said the sector was told that as refineries were making profits their margins should be reduced. “But, only on the basis of figures of three months March, April and May, the GRMs can’t be said to be higher and attractive.”

He pointed out that out of 100 barrels of crude oil, 96 percent is utilised for refining products whereas four percent was lost in the manufacturing. Refinery sector looks poised to outperform, as GRMs for May 2022 clocked in at ~$37/barrel versus average of ~$24/7/barrel in April 2022.

The high GRMs of the refineries are attributed to widening spreads on high speed diesel and furnace oil.

Attock Refinery’s GRMs were calculated at $31/barrel in May against $21/barrel in April.

For National Refinery Limited gross margins arrived at $38/barrel in May against $23/barrel in the preceding month year.

The GRMs for PRL's turned out t be $37/barrel in May 2022 versus $23/barrel in April 2022.