Byco Petroleum Pakistan has started upgrading its refining facility in Hub, which would convert furnace oil into Euro 5/6 gasoline and diesel. Byco expects commercial production from the upgraded facility by 2024.
Pakistan meets 70 percent of its motor spirit (MS) requirements and 35 percent of diesel demand through imports. Enhanced production of Euro 5/6 fuels locally would ease the oil import bill.
The company also plans to install two more Single Point Mooring (SPM).
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, which switched to LNG in October 2017 by the government order. Subsequently, hydro-skimming refineries had no market left for fuel oil. Furnace oil was even exported by Byco in January 2020 to scale down financial losses.
The government has finalized a new policy for petroleum refining under which an incentive package will be extended for setting up deep conversion refineries.
The package will provide a 20-year tax holiday and up to nine-year cascading customs duty reduction in pricing provided the investors sign construction agreements before Dec 31, 2021.
Byco recently held the groundbreaking of the “Upgrade-1” project recently, BPPL’s chairman Muhammad Wasi Khan told newsmen.
Byco has commenced civil works for the installation of Diesel Hydro Desulphurising (DHDS) and Fluid Catalytic Cracking (FCC) unit. The upgrade will enable Byco to reduce the production of low-value furnace oil and enhance the output of high-quality products, making them better for the environment as well as more valuable for business and thereby boosting Byco’s profitability.
Byco refinery is operating at 60 percent capacity due to higher production of furnace oil. With the conversion plant, its capacity utilization would reach 100 percent.
The product pricing formula of local refineries — both new and upgraded — shall be based on Import Parity Price (IPP) to be derived from the average daily Arab Gulf Mean Freight Onboard (FOB) spot price for the pricing period in use by the regulator, or if not published, shall be derived from average daily Singapore Mean FOB price for the same period.
All other elements, including premium, freight, port charges, incidentals, and import duties, shall be added FOB to arrive at IPP. Ad valorem taxes shall then be added to arrive at the final consumer price.
Wasi Khan said the government should also encourage the relocation of used refineries as a better business model as it was difficult for the government to spare funds for $5-10 billion worth of brand new refineries. He said large refineries have not come up despite many plans as returns on such large investments were not very attractive.
Wasi Khan said that the government should come out of the business of regulating oil prices. He proposed deregulating oil prices.
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, petrochemical, and lubricants. Heavy vehicles will continue using oil as it would be difficult for them to operate on electricity.