KARACHI: After hampered disruption caused by the floods last financial year, refinery sales rebounded by increasing 14% in the first two months of fiscal 2012, with contribution from high speed diesel and petrol to the growth standing at a whopping 91%.
Refinery sales headed upwards during July and August 2011 amid higher output by refineries and increasing demand for the product, according to an InvestCap research note.
With overall consumption growing by 9% and imports rising by 6% during the same period, contribution from domestic refineries also improved to 37% in total supply.
Increasing high speed diesel sales will further assist domestic refineries as it remains a positive contributor to profitability coupled with deemed duty. Deemed duty is a tax the government lets refineries charge in order to sell locally-produced diesel at the same price as imported diesel. High speed diesel sales rose 27 in the current financial year so far.
Meanwhile, petrol which is yet another high yielding product, also gained 13% on a monthly basis as its units went fully operational again.
Based on strong growth witnessed in high speed diesel and petrol volumes, white oil yield of the sector reached a new high by surging 13% in August compared with the same period last year.
Given this improvement, profitability of high yielding refineries such as Attock Refinery and National Refinery will improve, says the note.
Refinery margins are expected to have improved to nearly $4 per barrel in the first quarter of fiscal till date compared with last year’s $3 per barrel, adds the note.
Improvement in sales mix, volumetric growth and improved spreads are expected to bode well for domestic refineries in the near future, specifically those which have higher proportion of high speed diesel and petrol in their product mix.
Published in The Express Tribune, September 15th, 2011.