Byco refinery has commenced work on establishing an upgraded plant to convert furnace oil into Euro-5/6 petrol and diesel.
In January this year, Byco Petroleum Pakistan Limited conducted the groundbreaking of the project titled “Upgrade-1”.
Pakistan’s fuel mix has evolved rapidly in the past four years. Until mid-2017, furnace oil or fuel oil was the main feedstock for power plants. This was switched overnight to liquefied natural gas (LNG) in October 2017 by the government’s order.
Suddenly, hydro-skimming refineries had no market left for fuel oil and were at pains to store it.A byproduct of mak ing gasoline, diesel and other outputs of hydro-skimming, furnace oil was even exported by Byco in January 2020 to lessen financial losses that it incurred.
The plant will clean diesel and gasoline down to 10 ppm of sulphur to comply with Euro-5/6 standards.
Byco has started civil works and delivery of equipment has also been initiated, Byco Petroleum Chairman Mohammad Wasi Khan told journalists.
He said that Byco had commenced civil works for the installation of DHDS and FCC units. The addition of DHDS and FCC facilities to the refining complex will enable Byco to produce Euro-5 and Euro-6 compliant diesel and gasoline in Pakistan as per the government’s directive.
The upgrade will enable Byco to reduce production of low-value furnace oil and enhance the products’ quality.
New refinery policy
The government is currently working on a new oil refinery policy that offers incentives for upgrading existing projects and new refineries as well.
He said that the proposed refinery was good as far as refineries were concerned, which were operating now on negative margins due to lower prices of refined products. He urged the government to approve incentives for upgrading the plants. Wasi said that Byco’s upgrade project and conversion plant would be completed in 2024.
“We were of the view that the global oil industry will seek peak time in 2030, but it has witnessed its peak time now,” he said, adding that it had started to go down following other energy resources.
Oil prices stood at $100 per barrel before the pandemic, but they hardly touch $70 per barrel now.
He said that there had been expansion in electric vehicle (EV) and solar energy areas. Therefore, oil consumption is going down. However, he said that there would be a market for jet fuel, petrochemical and lubricants. “Heavy vehicles will continue using oil as it will be difficult for them to operate on electricity.”
Talking about oil consumption growth in Pakistan, he said that the oil industry had predicted demand for 30 million tons, but it stood at 20-22 million tons, which was below the projections.
He said that the market for furnace oil had ended now and the maritime industry had been using furnace oil but diesel oil was going to replace it.
However, there would be no immediate phase-out of jet fuel and petrochemical, he said, adding that hydrogen would largely remain in place. “Refineries will have to adjust to the market and as hydrogen will largely remain, refineries will have to convert to produce hydrogen.”
Oil price deregulation
At present, there is controlled regulation for oil prices. The oil industry had to follow the import parity price of Pakistan State Oil (PSO), which has been changed to Platts pricing.
At present, the prices of refined products are lower compared to crude oil with a difference of $2 to $6 that has put the refineries in negative margins. The chairman said that the government should come out of the business of regulating oil prices, proposing that oil prices should be deregulated but a regulator should remain.
He said that Byco also had plans to set up additional SPM 2 and SPM 3. At present, Byco refinery is operating at 60% due to higher production of furnace oil. With the conversion of plant, the production of refinery will go up to 100%.
Published in The Express Tribune, April 18th, 2021.
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