Pakistan is taking steps to speed expansion of its refining and oil transportation infrastructure.
While the country has made significant progress toward energy self-sufficiency by boosting oil and gas production (OGJ, Dec. 9, 1991, p. 19), it still must modernize and expand an aging, inadequate refining sector to meet rapidly growing demand for refined products.
Pakistan's government has disclosed plans to build two refineries in the country, one at Rawalpindi near a string of recent oil discoveries, the other somewhere in the southern part of the country, likely Karachi. At the same time, efforts are proceeding to upgrade Pakistan's refineries.
In addition, Pakistani state companies continue to press joint ventures in refining and marketing with foreign companies and expand downstream ties with neighbors that are key oil and gas exporters.
Pakistani demand for petroleum products averages about 220,000 b/d at present and is increasing at a rate of about 10%/year. But the country's total primary refining capacity is only about 121,000 b/d.
At the same time, new and expanded refineries in Pakistan must face national concerns over mounting air pollution problems, and the government is taking steps to trim harmful air emissions from products consumption.
Meantime, efforts to upgrade and expand Pakistan's petroleum transportation infrastructure continue.
In all the projects, the government is seeking private investors.
UPGRADES, EXPANSIONS
With Pakistan's three refineries meeting only a little more than half of current domestic demand for petroleum products, imports of products are expected to jump to 176,000 b/d in 1992-93 from today's volume of more than 90,000 b/d.
That deficit is especially keen in demand for gasoline and kerosine. Because of inadequate hydrocracking capacity to convert residual fuel oil to lighter ends, Pakistan is wasting the equivalent of 20,000 b/d of gasoline and kerosine.
State owned Petroleum Refinery & Petrochemical Corp. (Perac) plan; to install at its Karachi refinery a hydrocracker with capacity to upgrade about 28,000 b/d of resid into middle and lighter distillates.
The hydrocracker project is a joint venture with Crescent Petroleum of Sharjah and will use resid from its 46,300 b/d Karachi refinery and the 44,175 b/d National Refinery Ltd. (NRL) refinery, also at Karachi.
Construction has begun on a project to expand primary distillation capacity at the NRL refinery by 15,000 b/d. NRL also is implementing conservation measures to step up use of in-plant fuel for process heat and power needs.
Project cost is pegged at $8 million.
The $5 million hydrocracker project alone is expected to result in foreign exchange savings of $100 million/year. However, that will scarcely dent the growing level of imported products.
NEW REFINERIES NEEDED
Perac has proposed a 120,000 b/d, 50-50 joint venture refinery with Iran's National Iranian Oil Co. (NIOC) to be built at Port Qasim, Karachi.
After negotiations earlier this year, Perac and NIOC signed a memorandum of understanding in May. It is to be the biggest, most modern, integrated refining complex in the nation and use Iranian crude at first and Pakistani crude later if sufficient volumes are available.
The grassroots project is expected to be formally approved shortly early this year. Then consultants are to be hired to conduct a feasibility study during the following 6 months. Results of that study will help Iran and Pakistan decide site, financing, and other details to implement the project.
Also under consideration is a refinery of undisclosed size near Multan, preferably at Kot Addu.
POLLUTION CONCERNS
Mounting air pollution concerns are changing the composition of refined products used in Pakistan.
Under a new petroleum policy, the government has begun efforts to reform marketing and distribution of refined products, notably to curb octane and other fuel quality misrepresentation by setting uniform quality standards throughout the country.
Part of the effort to boost octane in Pakistani gasoline is a government pilot program to buy 3,500 metric tons of methyl tertiary butyl ether from Saudi Arabia to blend with Pakistani gasoline. According to government projections, the MTBE blended gasoline will provide a low priced, regular unleaded alternative to the only unleaded gasoline in Pakistan, a high priced premium grade.
The added refining capacity at Karachi is needed to boost Pakistan's production of unleaded gasoline while sustaining the overall octane pool. Pakistani motor gasoline has a lead content of 0.97 g/l at present.
JOINT VENTURES
Pakistan continues to press downstream joint ventures with foreign companies and governments.
Pakistan State Oil (PSO), Karachi, recently signed an agreement with Burmah Castrol plc unit Castrol Overseas to extend a products marketing program in Pakistan 25 years.
The agreement means Castrol products locally blended by PSO will continue to be distributed through a chain of more than 2,000 service stations throughout Pakistan. PSO was first appointed in 1966 as the exclusive agent for Castrol products in Pakistan.
The Pakistani-Iranian joint venture is one of five areas of cooperation between the two countries in the petroleum sector.
The others are:
- Iran's tentative agreement to a long term contract to supply heating oil to Pakistan.
- Tentative plans for Iran to supply natural gas to Pakistan via pipeline.
- Joint ventures between NIOC and Pakistan's Oil & Gas Development Corp. involving upstream work in Iran's and Pakistan's portions of the Baluchistan region.
- Iran's participation in an international oil seminar held in Islamabad last Nov. 20-21.
Negotiations also are under way with Iran to open rail and road routes to import oil.
In addition to Iran's offer to supply gas to Pakistan, a similar proposal has been made by a group of companies based in Qatar. The Qatari project would involve laying a pipeline from Qatar to Pakistan.
INFRASTRUCTURE CHANGES
Pakistan's oil sector infrastructure's biggest problem has been a lack of storage capacity.
That in turn led last year to shortfalls of products distributed via state owned Parco's 856 crude and products pipeline network from Karachi to northern provinces.
At the same time, the government has banned construction of more storage at Karachi's Keamari port area, creating a bottleneck for tanker offloading and storage systems.
To remedy the problem, PSO is implementing three projects costing a total of about $60 million to boost oil storage capacity in Pakistan to 1,123,470 bbl. The capacity additions are a 584,000 bbl, $18 million project at Pipri in the Karachi area, a 466,470 bbl, $25 million project, and a 73,000 bbl, $17 million project.
PSO spent about $21 million on the projects as of the end of the last fiscal year and has earmarked about $12 million for them in the current fiscal year. No foreign exchange is involved.
Despite the ban on new grassroots tank construction, Pakistan Federal Minister for Petroleum and Natural Resources Chaudhry Nisar Ali Khan recently inaugurated the Debottlenecking Keamari Facilities (DKF) project at the Korangi pump station in Karachi.
Debottlenecking boosted tanker offloading capacity by about 350,000 bbl and improved offloading speed and efficiency.
Kuwait Petroleum Corp. provided a grant of $3.265 million for the DKF project. PSO, Pakistan Burmah Shell Ltd., and Caltex Oil (Pakistan) Ltd. contributed about $1.62 million and provided technical assistance for the project. Construction was handled by China's Chinese Petroleum Engineering & Construction Corp.
Petroleum Ministry Sec. Kanwer Idrees said the DKF project will be an important element in plans to increase the Karachi-Multan oil pipeline capacity to 90,000 b/d from 58,000 b/d by yearend 1992. In a later phase, plans call for extending the system to Lahore and ultimately to the proposed refinery at Multan in the Rawalpindi area.
Pak-Arab Refinery Managing Director Shaid K. Hak said Parco has begun building two more pump stations, at Bubak and Fazilpur, as part of that initial pipeline capacity expansion. Parco also plans to extend the system by another 350 km from Mahmud Kot to Sheikhupura via Faisalabad.
Hak said Parco also has revised the original refinery proposal and started a feasibility study of a plant twice the original proposed capacity of 84,000 b/d to accommodate increased estimates of products demand in northern Pakistan.
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