PRL launches $1.7b refinery upgrade project
Pakistan Refinery Limited (PRL) has kick-started a refinery expansion and upgrade project (REUP) costing $1.7 billion in a bid to double its installed crude processing capacity to 100,000 barrels per day and boost the production of products with high profit margins as well as low-sulphur fuel including Euro-II and Euro-V petrol and diesel.
In addition, the installation of a deep-conversion refinery, a relatively new technology, along with the existing hydro-skimming refinery will give an edge to the state-owned company, which will become a pioneer in producing propylene chemical in the country. The chemical is used in the production of polypropylene plastics.
Speaking at a conference titled “PRL Connect 2024” on Friday, PRL Chairman Tariq Kirmani said the refinery’s products would substitute imports, reduce dependence on imported fuel and chemical products as well as save foreign exchange.
The refinery said in its latest financial statement for the quarter ended September 30, 2023 “work on front-end engineering design (FEED) of REUP is progressing as per the agreed timeline with targeted completion by September 2024 and the next step licence and engineering agreements have been signed with technology licensors. The search for the right potential strategic investor continues and PRL is engaged with potential investors in this regard.”
PRL MD/CEO Zahid Mir added that they had targeted to achieve financial close for the project soon or by the end of December 2024, meaning they would make all financial arrangements worth $1.7 billion to meet project cost. The project is set to be completed by the end of calendar year 2028.
Elaborating on the source of investment, he said 25% of financing would be provided by the government while the refinery would arrange $200 million a year by exporting furnace oil.
The government is collecting a 10% duty on sales of petroleum products and depositing it in an Escrow account. Funds from the account will also be available to the refineries for upgrade projects.
The MD revealed that the production of the outdated furnace oil would go down to zero from the current level of 30-40%. At present, the company is exporting furnace oil at negative margins. However, this has helped the refinery to make profit on overall production.
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PRL, a subsidiary of Pakistan State Oil (PSO), has embraced the Brownfield Refinery Policy, approved by the federal cabinet in August 2023. The policy, lauded for encouraging the existing refineries to upgrade and expand, provides PRL an opportunity to go for a transformative change.
This strategic initiative not only ensures a significant boost to the production capacity but also puts increased focus on enhancing profit. The project has been designed to halt furnace oil production and redirect efforts towards maximising the output of highly profitable products like petrol and diesel of Euro-V standards.
By aligning with market demands and prioritising lucrative fuel products, PRL’s REUP aims to set new industry benchmarks for financial success and sustainability.
Attock Refinery partially shuts
In a notification to the Pakistan Stock Exchange (PSX), Attock Refinery Limited (ARL) announced that it was partially shutting down production for about a month for plant maintenance, while the government made alternative arrangements to meet local energy demand.
“ARL is planning refinery turnaround to carry out essential maintenance with effect from February 10, 2024 for about a month. Consequently, some of the existing units of the refinery will be shut down, which will result in reduction of the refinery’s throughput to around 40%,” the notification read.
The shutdown plan has been approved by the Ministry of Energy (Petroleum Division) and the Oil and Gas Regulatory Authority (Ogra), which have made alternative arrangements to handle crude oil production in northern oilfields to bridge any potential shortfall.
Published in The Express Tribune, January 27th, 2024.
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