Pakistan Refinery unveils $1bln investment plan for upgrade

KARACHI: State-owned Pakistan Refinery Limited (PRL) on Friday unveiled one billion dollars worth of investment plan to upgrade technology for production of Euro II standard diesel.

“The board of directors of the company, after thorough deliberations, has decided to implement the refinery upgrade project with an approximate investment of one billion dollars,” PRL said in a filing with the Pakistan Stock Exchange.

“… for this purpose, the board has decided to invite expression of interest from world renowned engineering contractors for appointment as front end engineering design (Feed) and engineering, procurement and construction (EPC) contractor for the refinery upgrade project.”

The company has been exploring the option of conversion of the refinery into a deep conversion refinery along with achieving compliance with the government’s requirement to produce Euro II standard diesel. The refinery has a capacity of processing 47,000 barrels per day of crude oil into a variety of distilled petroleum products such as Furnace Oil, High Speed Diesel, Kerosene oil, Jet fuel and Motor gasoline, according to its website.

Pakistan has eight operating oil refineries in the country. The combined production of local refineries remained 13.5 million tons/year in the current fiscal year of 2017/18 versus the consumption of 26 million tons/year in the country, showing that local refineries meet around half of the local demand.

PRL has already got a comprehensive feasibility study completed through renowned international consultants that entailed evaluation of different technological variants, technical and financial viability to carry out the refinery upgrade project.

The company will invite competitive bids from the pre-qualified Feed and EPC contractors. PRL clarified that the proposed investment figure is a broad number and more reliable estimate of investment amount would be confirmed after completion of Feed, followed by the financial close of refinery upgrade project and EPC execution.

“This project will significantly improve company’s profitability besides providing significant foreign exchange savings for the country,” the company said. Oil import bill constitutes around a quarter of $60 billion annual imports. The country’s imports of petroleum products sharply increased 32 percent to $14.4 billion in the last fiscal year of 2017/18, the Pakistan Bureau of Statistics’ data showed. Imports of petroleum products rose 9.3 percent year-over-year to $7.5 billion.

Crude imports surged 66 percent to $4.2 billion. Import of liquefied natural gas soared 87 percent to $2.5 billion, while liquefied petroleum gas imports increased 20 percent to $271 million in FY2018.

The PRL’s refinery upgrade project is the second biggest investment commitment this year. Last month, Saudi government and Pakistan signed a memorandum of understanding for $10 billion worth of oil refinery and petrochemical complex in Balochistan.

The capacity of proposed oil refinery is estimated to be between 250,000 and 300,000 barrels/day (11 to 13 million tons per annum. The exact cost of the refinery would be determined after the feasibility study.