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Crude oil: As supply increases, refineries mull capacity boost

KARACHI:  Pakistani refineries are checking the prospect of increasing capacity as local crude oil supply has increased substantially,...

Crude oil: As supply increases, refineries mull capacity boost

KARACHI: Pakistani refineries are checking the prospect of increasing capacity as local crude oil supply has increased substantially, which will enable the country to resume export after a decade, a top industry official told The Express Tribune.

The refiners are in talks with crude oil producers to determine the size of reserves and expected level of production over the next few years, says Aftab Hussain, the chief executive officer at Pakistan Refinery Limited (PRL).
“Before making any investment, we should know projections for crude’s production for the next few years,” he said in a recent interview.
“For the refineries, increasing processing capacity is an expensive proposition and we want to be sure about expected production in the northern and southern areas of the country.”
Pakistan recently resumed export of condensate, known as ultra light crude oil.
Around 70,518 tons of condensate has been exported in the past two months, according to the Pakistan Bureau of Statistics (PBS). The value is stated at $60.7 million or Rs5.9 billion.
Average oil production in Pakistan jumped 13% to 86,000 barrels per day (bpd) in fiscal year 2013-14 compared to a year earlier. The oil output reached an all-time high of 98,000 bpd by the end of June 2014.
Hussain said historically, local oil production remained around 65,000bpd, which was consumed by local refineries. “Attock Refinery Limited, PRL, National Refinery Limited and Pak Arab Refinery were equipped to process that much of condensate.”
Major chunk of the increase in oil output came from Tal block, which saw average oil production rise 63% to 17,000 bpd. The block contributes 20% of total oil produced in Pakistan.
Industry officials believe that Pakistan’s crude oil output is expected to increase to 130,000 bpd in one or two years, a sharp rise from the stagnant 66,000 bpd seen in the last few years.
With around 42,000 bpd to 43,000 bpd consumption, Attock Refinery relies almost entirely on local crude. Other refineries have limited capacity to process it like PRL’s 7,000 bpd to 8,000 bpd.
The design of oil refineries is configured to process specific crudes like Brent or Light Arab Crude. Changes in the configuration require heavy investment, often out of the reach of small refineries.
“Attock is the only company, which is currently installing a plant to process 10,000 bpd of additional condensate,” said Aftab Hussain, who has been affiliated with the refining industry for over three decades.
“A 10,000 bpd facility costs $40-$50 million,” he said. “I am all for processing condensate within Pakistan.”
Condensate sells in the international market at a discount compared with other crudes because 60% of what comes out of it is naphtha, another raw material used mostly in petrochemical plants, he said.
“Internal cost of transportation and storage also adds to cost of local crude.”
Since December 2008, Pakistan has become a regular importer of petrol, buying 2.1 million tons of it during fiscal year 2014. But during the same period, refineries exported 854,653 tons of naphtha, which could be converted into petrol.
Like other refineries upgrading their plants to deal with the situation, PRL is also investing $400 million in Isomerization and Diesel Desulphurisation units. The Isomerization unit processes naphtha into petrol.
“It doesn’t make sense to export naphtha and then import petrol. So we have embarked on this import substitution initiative.”

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