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ISLAMABAD: M/s Byco Petroleum Pakistan Limited, the country's largest refining company, has commenced work on a project to convert furnace oil into Euro 5/6 petrol and diesel as the furnace oil market is heading towards its end.

In January 2021, M/s Byco Petroleum Pakistan Limited conducted groundbreaking on a project named “upgrade – 1”.

Pakistan’s fuel mix has evolved rapidly in the past four years. Till mid-2017, furnace oil or fuel oil was the main feedstock for power plants. This was switched overnight to LNG in October 2017 on the instructions of the then government. Suddenly, hydro-skimming refineries had no market left for fuel oil, and were at pains to store it.

A byproduct of making gasoline, diesel and other outputs of hydro-skimming, furnace oil was even exported by Byco to lessen financial losses incurred on it. The plant will clean the diesel and gasoline down to 10 ppm (parts- per million) of Sulphur to comply with Euro-5/6 standards.

Talking to a group of reporters, Chairman Byco’s Petroleum Pakistan Limited said that Byco has started civil work and delivery of equipment has also been initiated.

M/s Byco Petroleum Pakistan Limited has changed its name to Cinergyco PK Limited and also replaced the fund managers M/s Abraaj Capital by an investors group.

The Chairman further revealed that the first name of the refinery was Bosicor which was changed to Byco due to M/s Abraaj Capital which was not funding the project but was running a fund as portfolio manager. The Infrastructure Growth Capital Fund (IGCF) had given the management of the fund to M/s Abraaj Investment Management Limited (AIML) who established a Special Purpose Vehicle (SPV) which was registered in Mauritius under the name of Abraaj Mauritius Oil and Gas (AMOG) with shareholding with M/s Bosicor after which it became Byco Corporation .

When liquidation of Abraaj started, the IGCF Board got away with AIML, with the argument that M/s Abraaj's name should not be mentioned. The IGCF then handed over the management of the fund to another company – AM - which is now fund manager of IGCF.

The same 27-28 shareholders of Byco, are also the shareholders of Karachi Electric (KE). "Now Abraaj is out from Byco and the new company IGCF has taken over," he maintained.

As per our planned schedule Byco has commenced civil works for the installation of our DHDS and FCC units. The addition of the DHDS and FCC facilities to our refining complex will enable Byco to produce Euro 5 | Euro 6 compliant diesel and gasoline in Pakistan as per the government’s directive. The upgrade will enable Byco to reduce production of low value Furnace Oil and enhance our products’ quality, making them better for the environment as well as more valuable for our business and thereby will boost Byco’s profitability,” he added.

The government is currently working on new oil refinery policy that offers incentives for existing up-gradation projects and new refineries as well.

The Chairman said that the proposed refinery was good so far as refineries are concerned which are operating now in negative margins due to lower prices of refined products.

He urged the government to approve incentives for up-gradation of existing plants.

Wasi Khan said that Byco’s upgrade project and conversion plant would be completed in 2024.

“We considered that global oil industry will peak in 2030 but it has witnessed its peak time now,” he said, adding that it has started to go down now following other energy resources. The oil prices stood at $100 per barrel before the pandemic but have hardly touched $70 per barrel mark now.

He said that there had been an expansion in EV and solar energy therefore oil consumption is going down now but there will be a market for jet fuel, petro chemical and lubricants. Heavy vehicles will continue using oil as it would be difficult for them to operate on electricity.

About oil consumption growth in Pakistan, he said that oil industry had predicted 30 million tons but at present it stands at 20-22 million tons which is below projections.

He said that market of furnace oil had ended now and maritime industry has been using furnace oil but diesel oil was going to replace it. However, there will be no immediate phasing out of jet fuel and petrochemicals. He further said that hydrogen will remain.

Refineries will have to adjust to the market and as hydrogen will largely remain refineries will have to convert to produce hydrogen, Wasi Khan said.

At present, there are controlled regulations in oil prices. The oil industry had to follow the import parity price of Pakistan State Oil (PSO) which now is pegged to PLATTS price. At present, the prices of refined products are lower compared to crude oil with a difference of $2 to $6 that has put the refineries in negative margins.

Khan said that the government should come out of the business of regulating oil prices. He proposed deregulating oil prices. Byco is the first refinery in Pakistan that has set up Single Point Mooring (SPM), a floating liquid port in deep sea for crude oil shipments. It handles 12 million metric tons per year oil imports. He said that Byco also planned to set up additional SPM 2 and SPM 3. At present, Byco refinery is operating at 60 percent due to higher production of furnace oil. With conversion plant, the production of refinery would go up to 100 percent.

Copyright Business Recorder, 2021


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