OGRA likely to deny crude transport cost to Byco

Byco argues some other refineries are recovering the cost from consumers.

ISLAMABAD:

The Oil and Gas Regulatory Authority (Ogra) is expected to scupper attempts by Byco Refinery to collect Rs0.15 per litre as crude transport cost from consumers, on the grounds that commercial business should be fair and transparent and no special treatment should be given to a specific refinery, sources say.

The Economic Coordination Committee (ECC) of the cabinet had given Byco the go-ahead in August 2012 to charge 15 paisa per litre as crude transport cost from consumers, which was expected to provide the refinery Rs150 million to Rs200 million in a year for taking delivery of crude oil through a 15km pipeline at its Single Point Mooring (SPM) facility.

The ECC gave the approval despite resistance from the Ministry of Finance and the Federal Board of Revenue (FBR).

“Byco is a private refinery and it should run on commercial lines without collecting freight from consumers,” an official commented.

Citing the example of Pak Arab Refinery Limited (Parco), which was set up under an implementation agreement between the government of Pakistan and the emirate of Abu Dhabi, he said Parco was getting this facility because of being in the middle of the country where crude oil reached through a long 875km pipeline.



Attock Refinery Limited is also collecting crude transportation cost as it relies on domestic crude and receives supplies from different fields. The other two refineries – Pakistan Refinery Limited (PRL) and National Refinery Limited (NRL) – are not recovering any oil transportation cost.

Ogra is of the view that commercial business should be fair and transparent and there should be no subsidy for a specific refinery and consumers should not be overburdened.

Earlier, the finance ministry argued before the ECC that Byco had defaulted on payment of Rs5 billion on account of petroleum levy on sale of oil products. Ogra, the ministry and the FBR were also of the view that Byco had installed old machinery in its refinery and it should be denied the concessions given to Parco or the proposed Khalifa Refinery.



Byco management stresses that it will be taking delivery of imported crude oil at the Single Point Mooring set up 15km into sea along the coast of Balochistan and will not put additional burden on the public exchequer.

Initially, Byco Petroleum Pakistan, formerly Bosicor Pakistan, had set up an oil refinery with a capacity of 35,000 barrels per day at Hub, Balochistan in 2004. Recently, Byco Oil Pakistan completed work on another refinery of 120,000 barrels per day, close to the earlier project at Hub.

Talking to The Express Tribune, Byco Chief Executive Officer Amir Abbassciy pointed out that other refineries like NRL and PRL were established on the back of a guaranteed rate of return, but Byco was denied this incentive.

The government, he said, was offering 20-year tax holiday to refineries being set up in the coastal area of Balochistan with refining capacity of more than 100,000 barrels per day. Under this policy, Khalifa Refinery was given the 20-year tax holiday, however, he said, Byco was offered only seven-and-a-half-year tax break with the argument that the refinery had old machinery.

He added the ECC, headed by then finance minister Dr Abdul Hafeez Shaikh, had agreed on crude transportation cost for six months, but Ogra objected to it, saying it would conduct an audit.

“The audit was not conducted and Byco was not allowed the crude transportation cost,” he said and stressed there should be no discrimination as Parco and ARL were receiving the transportation cost.

Published in The Express Tribune, March 28^th, 2013.

Like Business on Facebook to stay informed and join in the conversation.