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Pakistan new refinery expansion policy to pave way for sharp reduction in fuel imports
4/27/2021 12:00:00 AM

Pakistan's refining capacity is expected to rise sharply in coming years as the pace of current upgrades and construction picks up ahead of the approval of the country's new refinery policy, paving the way for the South Asian consumer to sharply reduce its dependence on imports for gasoline and other oil products.

The expectations come amid a string of refinery upgrade works, with the 155,000 b/d Byco refinery and 50,000 b/d Pakistan refinery taking fresh steps to upgrade refining units to be able to produce higher quality motor fuels. Plans for the new 120,000 b/d Trans Asia refinery have also made progress, with an agreement between Pakistan Flow Petroleum Ltd and the UAE's Al Ghurair Investments being signed in mid-April, industry sources and refinery officials told S&P Global Platts.
Yousuf Saeed, Head of Research at Darson Securities Ltd., a Karachi-based brokerage house, said the plans could see Pakistan's refining capacity surge to 1.5 million b/d from 428,00 b/d currently, with six new domestic refineries expected to start up over the next six years.
"We believe the new refinery policy will encourage existing refineries to utilize this opportunity by upgrading their capacity and deploying the latest technology, which will ultimately reduce the reliance on petroleum imports," said Abdul Azeem, director research at Spectrum Securities, another Karachi-based brokerage house.
The refinery policy, which was drafted in July 2020, offers a series of tax holidays over 20 years for new deep conversion refinery projects with a minimum capacity of 100,000 b/d. The tax breaks would be applied to customs duties, profit taxes or any other levies on the importation of equipment or materials to be used in the projects, according to the draft policy document viewed by Platts, which is currently awaiting approval by the government before officially coming into force.
Some of the current initiatives of the Pakistan government include the construction of the 250,000 b/d Coastal refinery at Hub in Balochistan by refiner Parco, a 250,000 b/d refining and industrial park in Gwadar by SINO Infrastructure Hong Kong Oriental Times Corporation Ltd, and a 250,000-300,000 b/d upcountry deep conversion refinery to be built in collaboration between Pakistan State Oil and Power China International Group, Azeem said.
Fuel import reliance
With the expansion of new refining capacity, Pakistan is likely to expand overall domestic output of transportation fuels, reducing its currently high dependency on gasoline and diesel imports.
Pakistan oil product imports have averaged 97 million barrels/year over the past 10 fiscal years, but this could fall below 50 million barrels/year before 2030 if the refinery expansions and upgrades progress as scheduled, according to market analysts and refinery operation managers surveyed by Platts.
"Given the new plants being set up in the country, we expect the throughput of refining of petrol and diesel will increase over the years, which will eventually create a scenario for the decline in imports of refined gasoline products and eventually save billions of dollars for the country," said Yawar Uz Zaman, head of research at Pearl Securities.
Yawar expects Pakistan's refinery capacity to rise to 1.1 million b/d due to the new policy.
"Imports of refined products will come down. That will actually save $3-$4/b in FX reserves of the country," Shankar Talreja, research analyst at Topline Securities said.
Source: SP Global