aftab_husain challenges of the oil refining sector in pakistan
TRANSCRIPT
Challenges of the Oil Refining Sector in Pakistanby Aftab Husain Pakistan Refinery LimitedPakistan Energy Conference Islamabad, April 10-12, 2011
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Energy InsecurityTsunamiPakistan Refinery Limited
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
2025 Energy Mix Outlook Business as UsualLPG, 2% Nuclear, 1% Renewable, 1% Coal, 9% Hydel, 12% Gas Import, 45%
The total energy import bill in 2025 at US$ 100/ bbl will be
Oil, 25% Gas Local , 5%
$ 62 billionPakistan Refinery Limited
AgendaPakistan: Brief Overview
Pakistan Energy ScenarioOil: Global & Regional Pakistan Oil & Refining Landscape Challenges & Opportunities Questions & Answers
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Pakistan: Brief Overview
Population
187 million Growth rate 1.6% pa Per capita energy 0.29 MTOE
GDP
USD 170 billion (2010) Per Capita USD 1,044 Growth rate: 2.7%
Imports & ExportsPakistan Refinery Limited
USD 33 billion USD 20 billion Oil Import USD 10.2 billionSource: FBS Pakistan5
Pakistans Strategic LocationLand locked, energy rich Central AsiaUr umqi
KazakhstanToshkent
Frunze#
Almaty#
UzbekistanSamarkand
#
KyrgyzstanKashi#
TurkmenistanAshkhabad#
#
Dus hanfe#
Tajikistan China
Mashhad#
Her at#
Kabul#
Islamabad# #
AfghanistanYaz d#
Jum mu & Kas hmir (Disput ed Territ ory)
Raw alpindi Faisalabad Lahore# # #
Qandahar#
Booming China/India East Asia
Amritsar
Iran
Zahedan#
PakistanNew D elhi Delhi#
NepalKathmandu Kanpur#
Jaipur
Luc know#
#
IndiaHyderabad# #
#
Energy surplus Abu Z aby # Middle East Masqat # United Arab Emirates Oman
Benar es#
Patna#
Karachi Ahmadabad#
Calcutta Nagpur
Opportunity to become Asias trade, energy and transport corridorPakistan Refinery Limited6
Pakistan Energy Mix (2010-11)LPG 1% Coal 8% Hydel 10.3% Nuclear 0.7%
Gas 48%Oil 32%
Gas Oil Hydel Coal LPG Nuclear
Source: PIP Pakistan Energy Outlook 2011
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Agenda
Oil: Global and Regional
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Global Crude Consumption & Refining Capacity
Crude Consumption
87.9 mbpd
Refining Capacity
90.6 mbpdSource: IEA OMR 20119
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Global Refining Capacities (Million bpd)Region North America S. & Cent. America Europe & Eurasia Middle East Africa Asia Pacific Total World 2000 19.93 6.29 25.39 6.49 2.88 21.47 82.49 2005 20.69 6.419 24.99 7.28 3.22 22.95 85.58 2009 21.12 6.68 24.92 7.85 3.26 26.80 90.66
Major additions in Middle East, China & IndiaSource: BP Statistical Review 2009-10
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Regional Refining Capacity
China leads the region, followed by IndiaSource: IEA
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Agenda
Pakistan Oil & Refining Landscape
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Pakistan Product Consumption (Million MT, 2009-2010)MS 10%(2.0 M.Tons)
Others 7%(1.3 M.Tons)
FO 46%(9.0 M.Tons)
FO HSD MS Others
HSD 37%(7.2 M.Tons)
Source: OCAC 2009-10
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FO Consumption Pattern (10 year)10 9 8 7
Million MTs
6
54 3 2 1 0 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Industrial Power
Source: PIP Pakistan Energy Outlook 2010
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FO: Reasons for Increased ConsumptionElectricity Crisis:Increased FO demand for additional thermal power generation
Natural Gas Shortfall:Major cause for increased FO consumption in the power sector
More FO based power plants expected in coming years
Circular Debt & Negative Refining MarginsPakistan Refinery Limited15
Pakistan Crude and Refining Balance (bpd) Local Crude Production 65,000 285,000
Refining Capacity
Crude Oil DeficitPARCO NRLPRL
220,000 100,000
65,000 50,000
ARLByco
40,000 30,000
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Pakistans Supply & Demand Forecast40.0 35.0 30.0 25.0 20.0 15.0 10.0Local Supply
Demand
(Million TOEs)
Import
5.0 0.0
2010-11
2013-14JP1-JP8
2016-17SKO
2019-20LDO
2022-23Demand
2025-26
MS-HOBC
Local Supply
Source: PIP Pakistan Energy Outlook 2010-11
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Refining MarginsMargin or Misery!!
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Factors Influencing Oil Prices/Margins 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 gainPakistan Refinery Limited19
Hydroskimming Margins1.00 0.50 0.00 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 (0.50) (1.00) (1.50) (2.00)
$/bbl
(2.50)
Source: PLATTS
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Spread: Arab Light Crude Vs HSFO100.0 90.0
80.070.0 60.0
$/bbl 50.040.030.0 20.0 10.0
Arab Light HSFO
0.0 2004-05
2005-06
2006-07
2007-08
2008-09
2009-10 Source: PLATTS
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Historical Refining Margins4.00 3.00
2.00
Hydroskimming1.00
Hydrocracking$/bbl0.00
2002(1.00)
2003
2004
2005
2006
2007
2008
2009
(2.00)
(3.00)
Source: IEA 2010
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Refinery Margin: Hydroskimming Vs ConversionProductFull Range Naphtha
Hydroskimming Yields
Conversion Yields
15%
20%
Kero/JetHSD FO Margins $/bbl
20%25% 40% (0.237)
20%35% 25% 3.097
Numerous pre-owned conversion units on sale low capex solutionPakistan Refinery Limited
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Agenda
Challenges & Opportunities
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Challenges Under Utilization: Refineries operating at 71% of designed capacity Heavy dependence on petroleum product imports
Refinery Sustainability: Circular debt issue Hydroskimming Configuration Limitation to meet Euro II product specifications With low profitability, unable to raise finances
Policy Framework & Decision Making: Political will for hard decisions Pricing Mechanism Refining PolicyPakistan Refinery Limited25
Challenges (contd) :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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Challenge: Refinery ConfigurationRefineryPARCO NRL PRL
ConfigurationCCR/ Diesel Max/ Visbreaker Hydroskimming/Lubes Hydroskimming
ARLBPPL
HydroskimmingHydroskimming
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Realization of Planned ProjectsProject Barrels per Stream Day (BPSD)250,000 115,000
Million MT/ yr11 5
KCR Byco (new project)
IndusTrans Asia
100,000100,000
4.54.5
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Refining VisionRefineries having the technology and capacity to produce environmental friendly products, meet domestic demand and enable exports High Tech/Deep conversion/Integrated refineries
Serve as Strategic Asset meet country demand & enable exports
Meet regional and global product specifications
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Way ForwardGovernment support incentive in refining pricing formula under a defined timeline Environmental Projects such as Hydro-Desulfurization projects must be supported Level playing field and deregulation of petroleum product pricing regime Investors encouraged to set up Deep Conversion grassroots refineries and integration with Petrochemical complexes In future, only refineries having secondary conversion facilities to be allowed Set-up plants for export Naphtha conversion into MS and chemicals
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End
No Subsidies & Protection Compete & SurviveThank You!!!Q&A
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