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Challenges of the Oil Refining Sector in Pakistan by Aftab Husain Pakistan Refinery Limited Pakistan Energy Confer

Challenges of the Oil Refining Sector in Pakistan by Aftab Husain Pakistan Refinery Limited Pakistan Energy Conference Islamabad, April 10-12, 2011 . Energy Insecurity…………………Tsunami. Energy Crisis. PAKISTAN. Deficit...Shortages...Gap. Implications of business as usual.

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Challenges of the Oil Refining Sector in Pakistan by Aftab Husain Pakistan Refinery Limited Pakistan Energy Confer

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  1. Challenges of the Oil Refining Sector in Pakistan by Aftab HusainPakistan Refinery Limited Pakistan Energy Conference Islamabad, April 10-12, 2011

  2. Energy Insecurity…………………Tsunami Energy Crisis PAKISTAN Deficit...Shortages...Gap

  3. Implications of business as usual Unless there is a political will and resolve to implement an integrated energy plan the country will continue to face crisis on the energy front With nominal GDP growth projections of 2.5 – 4% the energy consumption by the year 2025 would be 138 MMTOE which translates to a Power Requirement of 39,000 MW Oil Requirement will be 34.5 MMTOE Gas Requirement 69 MMTOE The total energy import bill in 2025 at US$ 100/ bbl will be $ 62 billion

  4. Agenda

  5. Pakistan: Brief Overview Source: FBS Pakistan 5

  6. Pakistan’s Strategic Location Land locked, energy rich Central Asia Booming China/India East Asia Energy surplus Middle East Opportunity to become Asia’s trade, energy and transport corridor 6

  7. PakistanEnergyMix (2010-11) Source: PIP Pakistan Energy Outlook 2011 7

  8. Agenda Oil: Global and Regional 8

  9. Global Crude Consumption & Refining Capacity Source: IEA OMR 2011 9

  10. Global Refining Capacities (Million bpd) Major additions in Middle East, China & India Source: BP Statistical Review 2009-10 10

  11. Regional Refining Capacity China leads the region, followed by India Source: IEA

  12. Agenda Pakistan Oil & Refining Landscape

  13. Pakistan Product Consumption (Million MT, 2009-2010) Source: OCAC 2009-10

  14. FO Consumption Pattern (10 year) Source: PIP Pakistan Energy Outlook 2010 14

  15. FO: Reasons for Increased Consumption 15

  16. Pakistan Crude and Refining Balance (bpd) 16

  17. Pakistan’s Supply & Demand Forecast Source: PIP Pakistan Energy Outlook 2010-11 17

  18. Refining MarginsMargin or Misery!! 18

  19. Factors Influencing Oil Prices/Margins 19 • Fundamentals - Supply & demand - Product & crude inventories • Geo-political situation • Economy of major consuming countries • Currency – impact of dollar on price • Commercial & non commercial actors • Speculators for short term gain

  20. HydroskimmingMargins Source: PLATTS

  21. Spread: Arab Light Crude Vs HSFO $/bbl Source: PLATTS

  22. Historical Refining Margins $/bbl Source: IEA 2010 22

  23. Refinery Margin: Hydroskimming Vs Conversion Numerous pre-owned conversion units on sale – low capex solution

  24. Agenda Challenges & Opportunities

  25. Challenges

  26. Challenges (cont’d) :Pricing Developments • Incidentals from the product price build up removed whereas refineries pay on crude imports and a premium on freight • Kero and LDO pricing formula tempered – No PDC • Distorted Motor Gasoline pricing mechanism Vs import price • Jet fuel import price is higher than local • Additional FE expenditure - $32 million and refineries sustained revenue loss of about Rs.2.8 billion on MS production in 2009-10 • High oil prices to continue – tariff on HSD under threat??? No tariff protection--- No refineries

  27. Challenge: Refinery Configuration

  28. Realization of Planned Projects

  29. Refining Vision • High Tech/Deep conversion/Integrated refineries • Serve as Strategic Asset • – meet country demand & enable exports • Meet regional and global product specifications 29 “Refineries having the technologyand capacity to produce environmental friendly products, meet domestic demandand enable exports”

  30. Way Forward 30

  31. End 31 No Subsidies & Protection – Compete & Survive Thank You!!! Q&A

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