Demand for petrol likely to cross 8 million tonnes by 2020

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KARACHI: The demand for petrol will witness a higher increase than that for high speed diesel (HSD) and furnace oil (FO) in the coming years.

Petrol imports already hit 3.47 million tonnes in July-April 2015-16, with a monthly record of 414,396 tonnes in April 2016. During the full year of 2014-15, 3.12m tonnes of petrol were imported. The demand for petrol will cross 8m tonnes by 2019-20 from the current 4.73m tonnes, said Ilyas Fazil, the CEO of Oil Companies Advisory Council (OCAC).

Diesel growth remains one to two per cent per annum and will reach 8m tonnes by 2018-19 from the current 7.41m tonnes. Furnace oil demand will continue to stand at 9.2m tonnes. It will marginally decline due to increase in the use of LNG, he added.

He said that refineries are upgrading for better products. For Euro II (87 Ron) gasoline, Pakistan Refinery Ltd (PRL) has already commissioned its isomerisation unit in July 2015 while Attock Refinery Ltd (ARL) will commission its unit over the next two months. He said that other refineries are also in the process of compliance by June 2017.

For Euro II diesel (less than 0.05 sulphur), Pak Arab Refinery had commissioned its DHDS (diesel hydro desulfurisation) in 2012, while ARL is commissioning one within two months. Other refineries will follow suit by June 2017.

He said these projects had already cost the refineries close to $1bn. Fazil said these projects do not attract any value addition and are not viable on a stand-alone basis, adding that incentives in duties and taxes as well as product pricing were given but later withdrawn, causing losses to refineries.

He urged the government to ensure consistency in policy as any twists scare away investors.

He said that refineries will continue to import crude oil in the range of eight to nine million tonnes per year at Keamari. By 2019-20, total POL imports, including crude, are estimated at 27m tonnes, against the 21m tonnes in 2014-15.

Pipeline transportation

On pipeline transportation of POL products, he said that pipeline and road network hold 49pc of the share each in POL movement, while the share of rail stands at two per cent. He said the cost of transportation of POL products via pipeline in 2014-15 was Rs832m, against Rs1.2bn in 2013-14. By road network, POL movement cost Rs2.6bn in 2014-15 as compared to Rs 2.57bn in 2013-14.

The annual capacity of white oil pipeline (WOPP) which originates from Karachi and traverses 800km to mid-country is 8m tonnes and is capable of going up to double that with drag reducers and additional pumping stations. Currently, only 4m tonnes are being transported through it.

Between July 2005 and June 2015, over Rs84bn was saved as freight differential between the two modes of transportation due to its movement through the WOPP, Mr Fazil said, adding that PARCO/PAPCO, the owners of WOPP, are already working on making their pipeline system suitable for handling petrol in addition to diesel.

Storage: On storage, he said that oil marketing companies (OMCs) plan to implement storage enhancements and are in dialogue with the Ministry of Petroleum on recovery mechanism to achieve the same.

He said that strategic reserves vary as per government policy, adding that there was still no policy on strategic storages in Pakistan. He suggested the petroleum ministry to constitute a working group to evaluate detailed options for strategic storages and develop a future course of action in consultation with all stakeholders.

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