The significant rise in petroleum consumption in the last few years has not been complimented with growth in the local refining capacity. This rise in consumption has particularly been seen in the premier petroleum products like Mogas and diesel.
Record high volumes of Mogas and HSD at 7.2 and 9.1 million tons in FY17 still had the same small chunk from the local production while much of the increase is attributable to the imports – the local refineries produced only 1.8 million tons of Mogas in FY17 out of the total consumption of 7.2 million tons; and while it produced around 50 percent of the total HSD sales, the share has actually declined from 63 percent in FY14. Same is the case with another important fuel in the petroleum mix: furnace oil; however, discouraging FO in the power generation mix and replacing it with RLNG and coal based power eases of the capacity concerns.
Nonetheless, the gap of consumption to local refining has been widening at an alarming rate and banking on imports is not a rational approach. Not only has the local refining capacity remained stagnant, the port handling has been unimpressive too, especially in case of Mogas, evident from the shortages in the country from time to time. Besides, the local refining sector also faces the issue of underutilisation of capacity and hence lower efficiency due to fuel losses.
The country has six big and two small refineries that refine crude oil (85 percent imported and 15 percent indigenous). There have been some positive developments in the last few years, but investment in refining capacity is much needed. While there are many MoUs and agreements being signed for investment in refineries, the latest Economic Survey highlights Byco’s Oil Refinery at Hub, Balochistan with refinery capacity of 120,000 Barrel Per Day (5 million tons/annum) along with its Single Buoy Mooring (SBM) facilities for transportation of imported crude oil and petroleum products from ships to the storages tanks having a capacity of 12 million tons per annum. It also pinpoints PARCO’s Khalifa Coastal Refinery having a capacity of 250,000 barrels per day (over 11 Million tons per annum), which is expected to come online by 2023.
Apart from these, refineries like Attock, National and Pakistan Refinery have enhanced their Mogas production with the installation of summarization plants and are working on Diesel Hydrodesulphurization Units to enhance the production of HSD.
However, one cannot count these capacities until they actually come online. Till then the imports will continue to dominate consumption. An incentive for refineries in the latest Budget presented by the last government in office revolves around attracting foreign investments in the sector. This involves exemption to deep conversion refineries including exemption from all duties, taxes, surcharges and levies on import besides a 20-year income tax holiday. The incentive is applicable not only on new deep conversion refineries but on existing facilities where refining capacity has been expanded by installing deep conversion units with capacity of at least 100,000 barrels per day setup between 1st July 2018 to 30th June 2023. Investment in deep conversion refineries in crucial for enhancing local capacity, and whoever takes up the federal office in the coming elections should not put refineries on a back burner.
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