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Challenges of the Oil Refining Sector in Pakistan by Aftab Husain Pakistan Refinery Limited Pakistan Energy Conference Islamabad, April 10-12, 2011 . Energy Insecurity…………………Tsunami. Energy Crisis. PAKISTAN. Deficit...Shortages...Gap. Implications of business as usual.

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Challenges of the Oil Refining Sector in Pakistan

by Aftab HusainPakistan Refinery Limited

Pakistan Energy Conference

Islamabad, April 10-12, 2011


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Energy Insecurity…………………Tsunami

Energy Crisis

PAKISTAN

Deficit...Shortages...Gap


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Implications of business as usual

Unless there is a political will and resolve to implement an integrated energy plan the country will continue to face crisis on the energy front

With nominal GDP growth projections of 2.5 – 4% the energy consumption by the year 2025 would be 138 MMTOE which translates to a Power Requirement of 39,000 MW Oil Requirement will be 34.5 MMTOE Gas Requirement 69 MMTOE

The total energy import bill in 2025 at US$ 100/ bbl will be

$ 62 billion



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Pakistan: Brief Overview

Source: FBS Pakistan

5


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Pakistan’s Strategic Location

Land locked, energy rich Central Asia

Booming China/India

East Asia

Energy surplus Middle East

Opportunity to become Asia’s trade, energy and transport corridor

6


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PakistanEnergyMix (2010-11)

Source: PIP Pakistan Energy Outlook 2011

7


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Agenda

Oil: Global and Regional

8



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Global Refining Capacities (Million bpd)

Major additions in Middle East, China & India

Source: BP Statistical Review 2009-10

10


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Regional Refining Capacity

China leads the region, followed by India

Source: IEA


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Agenda

Pakistan Oil & Refining Landscape


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Pakistan Product Consumption (Million MT, 2009-2010)

Source: OCAC 2009-10


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FO Consumption Pattern (10 year)

Source: PIP Pakistan Energy Outlook 2010

14


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FO: Reasons for Increased Consumption

15



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Pakistan’s Supply & Demand Forecast

Source: PIP Pakistan Energy Outlook 2010-11

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Refining MarginsMargin or Misery!!

18


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Factors Influencing Oil Prices/Margins

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  • Fundamentals

    - Supply & demand

    - Product & crude inventories

  • Geo-political situation

  • Economy of major consuming countries

  • Currency – impact of dollar on price

  • Commercial & non commercial actors

  • Speculators for short term gain


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HydroskimmingMargins

Source: PLATTS


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Spread: Arab Light Crude Vs HSFO

$/bbl

Source: PLATTS


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Historical Refining Margins

$/bbl

Source: IEA 2010

22


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Refinery Margin: Hydroskimming Vs Conversion

Numerous pre-owned conversion units on sale – low capex solution


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Agenda

Challenges & Opportunities



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Challenges (cont’d) :Pricing Developments

  • Incidentals from the product price build up removed whereas refineries pay on crude imports and a premium on freight

  • Kero and LDO pricing formula tempered – No PDC

  • Distorted Motor Gasoline pricing mechanism Vs import price

  • Jet fuel import price is higher than local

  • Additional FE expenditure - $32 million and refineries sustained revenue loss of about Rs.2.8 billion on MS production in 2009-10

  • High oil prices to continue – tariff on HSD under threat???

    No tariff protection--- No refineries




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Refining Vision

  • High Tech/Deep conversion/Integrated refineries

  • Serve as Strategic Asset

    • – meet country demand & enable exports

  • Meet regional and global product specifications

29

“Refineries having the technologyand capacity to produce environmental friendly products, meet domestic demandand enable exports”



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End

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No Subsidies & Protection – Compete & Survive

Thank You!!!

Q&A


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