A matter of weeks: Byco ready to utilise its Hub refinery

Issue relating to transporting diesel resolved.

KARACHI:

Byco International Incorporated (BII) is ready to fully utilise its 120,000 barrels per day (bpd) crude oil refinery after a long-pending issue related to the transportation mode of diesel was resolved, a top company official said.

The company is waiting for high monsoon tides to recede before embarking on the operation of moving the refined petroleum product onboard charted vessels to Port Qasim from where it could easily be pumped to other cities, said BII Chairman Amir Abbasscisy.

“We have got all the relevant approvals and we will start working on it in the next few weeks,” he said.

BII has built the country’s largest refinery supplemented by country-wide fuel stations and a petrochemical complex to make products like paraxylene. Additionally, Byco has another smaller 35,000 bpd refinery, which is registered as Byco Petroleum Pakistan Limited.

But its new refinery, located in Hub, Balochistan, has not been able to run at full capacity since the plant was inaugurated earlier this year.

The main reason for that was the difficulty in taking high speed diesel (HSD) to customers, most of which are based in Punjab and further north.

Initially when the refinery was being set up, BII hoped to use Asia Petroleum Limited’s (APL) 82-kilometer long pipeline to move diesel to Port Qasim. But negotiations with the APL sponsors failed to materialise.

The APL pipeline is used to supply furnace oil to Hub Power Company’s 1,300MW power project, which is the next-door neighbour of Byco’s refinery. APL charges $12 per ton to transport that furnace oil from the port a price that Byco says it could not have matched.

As an alternative, the company came up with a plan to ferry diesel from its refinery to Port Qasim from where it can be pumped through the cross country white oil pipeline. HSD makes up 40% of the refinery’s output.

Byco already has the advantage of having a single point mooring (SPM) facility, a floating jetty connected with storage tanks with a 15km long pipeline, which allows ships to take and offload oil without coming to shore.

The company has retrofitted the facility with pumping machines to pump diesel into ships with the addition of a tanker that will move the cargo. The entire operation from filling 50,000-ton tanker, shipping it to Port Qasim and then offloading it there, will take three-and-a-half days.

BII estimates that it will cost around 70 paisa per litre to take diesel from the refinery to Port Qasim and this amount should be covered under the inland freight equalisation margin (IFEM), a central pool of funds used to keep price of petroleum products same across the country.

However, government has yet to give a nod for recovering this cost from IFEM.

Depressed refining margins took a toll on the smaller refinery as Byco Petroleum Pakistan booked a net loss of Rs2.75 billion in the nine months to March 2014 against a profit of Rs552 million in the same period of previous year. It was also learnt that the new refinery is not publicly listed.

Private equity firm Abraaj Capital has also decided to divest, marking what officials say is right time to exit as the project is finally ready to come online.

Published in The Express Tribune, July 5^th, 2014.

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