Attock Refinery to upgrade plant, boost gasoline output

Negotiating with government for change in pricing mechanism.

SINGAPORE: The Attock Refinery Limited (ARL) plans to upgrade its refinery in northern Pakistan over the next two years by adding new units to produce more gasoline and feed a growing national supply deficit, the company’s chief executive said on Thursday.

The $100 million upgrade to build an isomerisation and a pre-flash unit will stall the company’s naphtha exports in favour of more valuable gasoline, Adil Khattak told Reuters on the sidelines of the Asia Refineries Conference in Singapore.

For Attock, the investment in the two units will increase production of “a more value-added product, so that would be adding to our profits,” he said.

Attock earlier this month invited bids to build the units at its 45,000-barrel-per-day (bpd) refinery that will take capacity to more than 55,000 bpd by the end of 2013. Bids must be submitted by May and a winner and final investment decision is expected by July or August, Khattak said.

The five refineries of the country yield a naphtha surplus of about 650,000-700,000 tons per year because the country lacks a petrochemical industry to use it as a feedstock, according to Khattak.

At the same time, the country’s demand for oil products stands at more than 20 million tons per year compared with domestic output of about 12 million tons per year, Khattak said.

Much of that growing deficit is in gasoline, as smuggling from Iran receded in the past year and a natural gas shortage rendered compressed natural gas (CNG) vehicles unpopular. But the existing pricing regime discourages the construction of new refineries and the gasoline deficit may keep growing, Khattak said.

“The prices are determined by the government, so the pricing mechanism does not give enough return on investment to the potential investors in the refinery,” he said. “We are having negotiations with the government for some positive change in the price mechanism. Unless that happens, I don’t expect any new investment to come into new refinery projects.”

Attock procures the entirety of its crude supply from domestic production in the north of the country, where output is increasing, the CEO said.

Published in The Express Tribune, January 21^st,  2011.