Expanding oil refining infrastructure

Demand for the POL (petroleum, oil, lubricants) products in Pakistan is growing stronger on a year-on-year basis. It is projected that the annual demand of POL products would increase to 19 million tons by the year 2017-18 and over 34 million tons by 2025-26 against the present consumption of 20 million tons.
Current domestic refining capacity is insufficient to meet present demand of the POL products. Today, the country has a total refining capacity to process around 287,000 barrels per day (bpd) or, equivalent 13 million tons, of crude oil annually. There are seven oil refineries operating. Major players in the sector are Pak-Arab Refinery Co Ltd (PARCO) of 100,000 bpd, National Refinery Ltd of 65,000 bpd, Pakistan Refinery Ltd of 50,000 bpd, Attock Refinery Ltd of 40,000 bpd and Byco (formerly Bosicar) Pakistan Ltd of 30,000 bpd output capacity. The balance annual demand of 7 million tons oil is being met through imports. Attock Refinery is totally dependent on local crude and gas condensate, whereas PARCO, which is a joint venture between the governments of Pakistan and the UAE, processes heavy crude from the UAE only. Pakistan Refinery and National Refinery also process indigenous crude, blending with crude oil imported from the Gulf and Saudi Arabian sources.
It was planned for many years to undertake up-gradation and capacity expansion of the existing refineries and to set up new refinery projects in the private sector. It was projected to achieve total capacity to 400,000 bpd by 2009, and, subsequently, 520,000 bpd in 2014. The plans however could not be implemented as envisaged. There has been a nominal increase in capacity expansion in the past years but no new refinery project could come on stream. On the other hand, capacity utilisation of the existing oil refineries has been declining in recent years due to a variety of reasons. At present, the refineries are not even operating at optimal available capacity, as a result of the circular debt issue. This situation would result in further widening the gap between demand and oil supply in coming years, rather there are already signs of the country facing a severe oil crisis in the short-term.
In a latest development, the industry has revived its plans for modernisation and capacity expansion aiming to develop capability to produce large quantities of ultra-clean fuels in line with global trend of stricter quality specifications. Now, Attock Refinery plans to expand its installed capacity to 53,000 bpd within four years or so, with an investment of $100 million. Likewise, Pakistan Refinery plans to install isomerization unit (for improving the octane value), diesel hydro desulfurization (DHDS) complex and thermal gas oil unit at a total cost of $250 million. Another investment of $300 million will be made by National Refinery for further expansion of its facilities including installation of isomerization and DHDS units. Bosicar Refinery claims that its throughput has recently increased to 35, 000 bpd, as a result of revamping and de-bottlenecking of existing refinery, and may further enhance shortly to 40,000 bpd.
A new refinery by Byco Oil Pakistan Ltd at Mouza Kund in Balochistan is the only project being undertaken at present. This new unit of 115,000 bpd capacity to refine crude oil, relocated and currently under construction at a cost of $430 million is scheduled to commence its operations by 2012. The company is also establishing a petrochemical complex, with an initial capacity of 17,100 bpd to produce aromatics like benzene, toluene and xylenes, for which plant machinery has already been imported. The proposed Khalifa Coastal Refinery, of capacity to process 250,000 bpd or 13 million tons of crude oil annually, would be the largest refinery in Pakistan on completion. To be installed near Hub in Balochistan, the refinery was approved by the ECC of the Cabinet in 2007 at a cost of $5 billion, now revised to $6 billion.
The project, a joint venture of PARCO and International Petroleum Investment Co (IPC) of the UAE, was scheduled for commissioning in 2011. Sadly, there has been no physical progress on the construction of Khalifa Refinery as yet, for which the government has provided 1,000 acres of land to the investors as free-hold lease without charging any rent. The reported, the project is being revived. The Trans-Asia Refinery project of 100,000 bpd capacity was planned at Port Qasim, Karachi with the help of Kuwait and South Korea. Also, Kuwait and Saudi Arabia had shown interest to set up refineries of 200,000 bpd at Port Qasim and 300,000 bpd capacity at Hub, respectively. China wanted to construct a refinery and petrochemical complex at Gwadar. Nonetheless, there has been no progress on any of these projects.
Availability and affordability of energy is essential for sustainable economic growth. To effectively meet the future oil demands, the existing oil-refining infrastructure is to be augmented. For the purpose, the government needs to intervene and expedite implementation of the planned refinery projects within agreed, time schedules, ensuring a conducive environment for investment.
(The writer is retired Chairman of the State Engineering Corporation, Government of Pakistan)