Global Refining Industry – Focus on Pakistan

Which country in the Asia-Pacific region shows the highest growth rate in oil refining capacity this century? China? India? South Korea? The correct answer is Vietnam, but the second place is also not obvious - it is Pakistan, whose oil refining capacity grew by 6.3% from 2000 to 2018, exceeding 400 kbpd (see Figure 1).

Figure 1 – Pakistan’s Refining Capacity and Oil Product Imports

Sources: BP, IEA

The main objective of the development of the oil refining sector in Pakistan can be said to be the reduction of the country's dependence on imports of oil products. In 2000, total imports amounted to more than 10 MMtpa, which amounted to more than 50% of domestic consumption.

The first step toward reducing this dependence was the start-up of the Pak-Arab Refinery (PARCO) Mid-Country Refinery (MCR) in 2000, a joint venture between governments of Pakistan and Abu Dhabi. The refinery is located near Multan in the Punjab province, which is the country's largest region by population. Construction of the refinery cost $ 886 million and its capacity is 100 kbpd.

The next step in the further development of the oil refining sector in Pakistan was the commissioning of the Byco Petroleum Pakistan Ltd refinery in 2004. Unlike MCR, this refinery is located on the coast in Mouza Kund which greatly simplifies the supply logistics of oil and the shipment of petroleum products and is located only 40 km from Karachi, the largest city in Pakistan. Byco refinery’s original capacity was 17 to 18 kbpd, but a series of subsequent extensions increased its capacity to 35 kbpd by 2008.

Undoubtedly, the above-mentioned PARCO and Byco projects allowed for the reduction of the country's dependence on imports, but they were not sufficient to meet the growing demand for oil products in Pakistan. By the end of the 2000s, imports returned to the level of 10 MMtpa.

At the same time, Byco decided to build a new refinery, also located in Mouza Kund. The refinery was commissioned in 2012, resulting in Byco’s total installed capacity increasing to 155 kbpd. Byco’s refineries now produce a full range of products from crude oil, including LPG, naphtha, gasoline, kerosene, jet fuels, diesel and fuel oil.

However, the challenge remains and the growth of oil refining capacities in Pakistan is not able to keep up with the growth in consumption of oil products, which creates a need for the implementation of projects to further expand oil refining in the country.

In May 2018, PARCO announced an award to TechnipFMC for a Project Management Consultancy (PMC) services contract to carry out the management of pre-EPC activities for a grassroots, fully integrated, deep conversion refinery to be constructed at Hub near Karachi. The project will be managed and operated by the wholly owned subsidiary, PARCO Coastal Refinery Limited (PCRL). When completed the facilities will comprise a modern, deep conversion refinery with a capacity of 250 kbpd.

In April 2018, Amir Abbassciy, Byco’s co-founder and CEO, confirmed the company would be looking at further expansion to the refinery. “That will be similar in size to what we already have; an additional refining capacity of somewhere between 30-150 kbpd. We will also be expanding our range of products including multi-grade gasoline for the local market,” Amir explained.

In addition to these projects, according to information from official sources, the Pakistan government is counting on the implementation of several more oil refining projects, including:

·        Hong Kong’s SIOT would establish 250 kbpd refining and industrial park at the deepwater port of Gwadar,

·        Upcountry deep conversion refinery and crude pipeline of 250-300 kpbd would be set up in collaboration with Pakistan State Oil and Power China International Group,

·        Falcon Oil, a part of Pakistan’s WAK Group, to set up 40 kbpd upcountry refinery at Dera Ismail Khan,

·        Khyber Refinery Limited would establish 20 kbpd upcountry refinery in Kohat.

Cooperation between Pakistan and Saudi Arabia in the field of oil refining has also been announced.

In February 2019, during Saudi Arabia's Crown Prince Mohammed bin Salman visit to Islamabad, $20 billion in investment deals were signed to shore up Pakistan’s economy. That includes a $10 billion refinery and petrochemical complex with a capacity of 300 kbpd. The complex will be located at the deepwater port of Gwadar.

Before the visit of the Crown Prince, a Saudi technical team, including Energy Minister Khalid Al-Falih, visited Gwadar twice to examine a site for the refinery, and received briefings from Pakistani officials.

“We are working on feasibility studies for the establishment of the oil refinery and petrochemical complex in Gwadar, and will be ready to start by early 2020,” Pakistan’s Minister for Petroleum Ghulam Sarwar Khan said.

A Saudi technical team, including Energy Minister Khalid Al-Falih, visited Gwadar to examine the site for the refinery. (Twitter photo)

 In 2019, Pakistan’s Oil Companies Advisory Council (OCAC), which constitutes all of the oil refiners and downstream oil marketing companies, estimated that domestic demand for petroleum products will rise at a robust rate of 10% per annum for the next five years. If the forecast is correct, the development of oil refining can be considered a priority for Pakistan’s energy strategy aimed at ensuring the country's energy security and sustainable economic growth.

 To find out more about the current state of the refining industry in the Middle East and its neighboring countries, don't miss Euro Petroleum Consultants’ ME-TECH 2020 - 10th Middle East Technology Forum for Refining & Petrochemicals from February 18-20, 2020 in Abu-Dhabi.