Oil refineries crippled by circular debt

KARACHI: Byco Petroleum has urged the government to resolve the circular debt crisis and increase oil refinery margins. Both these steps will help reduce the country’s reliance on refined oil imports.

In an exclusive interview with The Express Tribune, Kalim Siddiqui, President Petroleum Marketing Business, Byco Petroleum Pakistan, said that the issue of refinery margins also needs to be addressed as it is not possible for any commercial entity to operate on such small margins.

“We do not want high returns but we do deserve reasonable returns on our large-scale investments,” highlighted the former managing director of Pakistan State Oil.

Oil marketing companies also ran a week-long advertisement campaign in newspapers requesting the government to sort out the problem of circular debt.

Byco Petroleum Pakistan Limited (BPPL) has recently launched its new identity with a massive rebranding campaign. The company has outlined ambitious targets to capture market share with the quality of services it offers.

Siddiqui, however, did admit that there was a long way to go. “Since the local oil industry expects deregulation in the near future, the competition will certainly increase,” he pointed out.

At present, 12 petroleum marketing companies operate in Pakistan and if the government decides to deregulate further the competition will get tougher.

Even though deregulation could translate into lower margins because of increased competition, the man in charge of marketing petroleum for Byco was all for the move.

He explained that deregulation would be good for the oil industry just as it had proven beneficial for other industries, for example telecommunications companies in Pakistan.

“It is a wrong perception that deregulation is not good for the economy and that is why a few people with vested interests oppose it,” he added.

He predicted that the ultimate goal of all oil marketing companies, after deregulation, would be to compete with rivals on the quality of services offered.

Siddiqui, whose company is all set to become the largest oil refinery in the country by December, said that Pakistan needs more refineries to overcome the massive demand for refined oil.

At present, BPPL refines 30,000 barrels of the crude oil per day but after new refinery comes on stream, the total capacity is expected to shoot up to 150,000 barrels per day.

Siddiqui was of the view that the circular debt crisis has crippled the capacity of refineries to process crude oil. He explained that the country had to import oil because refineries in the country were only utilising 60 per cent capacity because of financial constraints.

Siddiqui wants to see his company in the top three petroleum marketing companies in Pakistan. BPPL is all set to emerge as a full-fledged oil marketing company with retail marketing and consumer marketing services. Eventually, Byco also hopes to export its products.

Published in The Express Tribune, August 14^th, 2010.