Islamabad November 8 2023: Attock Refinery Limited (ATRL) is concerned regarding the decreasing availability of local crude due to natural depletion and other factors as company’s future expansion depends on crude availability.
“ATRL intends to undertake upgradation projects to produce Euro-V Motor Gasoline and High Speed Diesel under the Refining Policy” states the company.
“After continuous follow up with the Government, the Refining Policy for brownfield refinery projects has been finally approved. The Company is actively engaged with OGRA to fulfill certain pre-requisite conditions to become eligible for claiming fiscal incentives under the Policy. With approval of the Policy, ARL intends to undertake a major upgradation project for value addition” the company further added.
During the first quarter, the Company supplied 457 thousand Metric Tons of various petroleum products while operating at 81% of the capacity (September 30, 2022: 448 thousand Metric Tons, 79% capacity). After corrective actions by the Government against the smuggling of petroleum products, the pressure on the Company’s sales of HSD has reduced and the Company was able to sell normal volumes.
Pakistan Oil Refining Policy – 2023 is focused on existing Refineries, encouraging them to upgrade their Refineries to produce Euro-V specification Motor Gasoline & Diesel. Refineries providing undertaking to upgrade within 3 months of notification of policy shall be allowed to retain custom duty of 10% on Motor Gasoline and 2.5% on Diesel for a period of 6 years for Upgradation. Moreover, Refineries will be allowed to use the amount accumulated in joint escrow account for up-gradation purpose, upto a maximum of 25% of total up-gradation cost.
The company is actively pursuing the sourcing of crude from southern-based fields, specifically the Badin crude, which amounts to approximately 5,000 barrels per day. The company is presently awaiting approval from the Government of Pakistan (GoP) for this endeavor.
“In terms of the incremental duty outlined in the refinery policy, refineries that wish to benefit from these incentives must commit to upgrades by establishing an escrow account and providing a bank guarantee of PKR 1.0 billion before November 16, 2023, which is three months after the notification of the refining policy” states Muhammad Ali Analyst at AKD Securities.
The estimated cost of refinery upgradation is around US$500 million, with the actual costs to be disclosed once an EPC contractor is hired. The upgradation goals include enhancing the Continuous Catalytic Conversion unit, upgrading DHDS, revamping Isomerization, and establishing a Kerosene treatment facility.
“As ATRL heavily relies on indigenous crude, the expansion of the refinery is contingent upon the future availability of crude in the KPK and Pothohar region, which currently stands at approximately 41,000 barrels per day. The company has made a request to divert 5,000 barrels of condensate/crude from the south to meet its needs. The refinery's potential for expansion hinges on the assurance of future crude availability, as importing crude oil is currently not economically viable” states Muhammad Ali.
“In the event that crude oil production continues to decline in the northern part of the country, the company has the option to source crude from the southern region or even consider imports from neighboring countries in South Asia and Afghanistan, if necessary,” Ali Added.
“ATRL is not contemplating a bottom-of-the-barrel upgradation project, unlike other refineries. According to the management, their primary focus is on upgrading to Euro-5 specifications, as they are currently facing penalties from the authorities for producing High-Speed Diesel (HSD) with higher sulfur content than allowed. Furthermore, the upgradation will enable the conversion of unwanted Naphtha into more value-added Motor Gasoline” states Ali.