Exclusive Conversation with Mr. Kalim A Siddiqui — former President, Byco Petroleum
Profile:
Mr. Kalim A Siddiqui is a former Managing Director of Pakistan State Oil and former President of Byco Petroleum. He holds a Bachelor’s in Chemical Engineering from the University of Bradford in England (UK) and a Master’s in Chemistry from Karachi University and has broad-based, global experience by working in the USA, UK, Australia, Vietnam and Pakistan for over 36 years.
He is an enthusiastic and highly accomplished Executive with 36 years of extensive fuels/lubricants business expertise in marketing, sales, operations management and system re-engineering in the oil industry by running supply chains, streamlining processes, hunting for new business and growing top producing accounts. He has experience in developed and emerging markets/cultures. He is a collaborative Leader with an aptitude to achieve change, excite the organization, infuse new ideas and deliver dramatic, bottom-line outcomes; recognizes to accomplish multiple customer-specific priorities with competence, exemplary follow-up and interpersonal abilities. He is highly expert in high-level market segments, top-down selling and vertical market mastery.
He has served as Chairman Oil Companies Advisory Committee (OCAC) and has held directorships in various reputable companies and professional and educational institutes including Pakistan Refinery Limited, Pak-Arab Pipeline Company, Asia Petroleum Limited, Pak-Grease Manufacturing Company Limited, Petroleum Institute of Pakistan, Pakistan Advertisers Society and Lahore University of Management Sciences.
Before joining PSO in 2001, he had served in Caltex (now Chevron) for over 20 years locally as well as internationally. International assignments were located in the USA, Australia and Vietnam. In a longer spell of over 20 years in Caltex, he had dealt with fuels, lubes and LPG in all aspects like product development, product engineering, supply chain, operations, production/manufacturing and sales/marketing.
His three years of work in the UK was with Howden Engineering Company, Burmah-Castrol refinery, North West Water Authority and A.P.V Company before coming back to Pakistan in 1980.
PAKISTAN & GULF ECONOMIST had an exclusive conversation with Mr. Kalim A Siddiqui about oil refineries in Pakistan. Following are the excerpts of the conversation:
The oil refineries have been running well below their design capacities. This under-utilization, if resolved, could give the government an opportunity to save some foreign exchange.
There are five main oil refineries in Pakistan. Byco Petroleum and Pak Arab Refinery (Parco) are the largest, which represent more than half of the nation’s throughput capacity and processed volumes.
The five refineries can process up to 19.4 million tons of crude oil annually but their total output was around 11.6 million tons in the last financial year, as per data from the Economic Survey of Pakistan and Oil Companies Advisory Council. From this, we can estimate that the country utilised just approximately 60 percent of its oil refining capacity in the last financial year.
Refineries turn crude oil into petrol, diesel, furnace oil, and other refined products. As such, they play an important role in Pakistan’s energy landscape. However, the refiners only satisfy around 30 percent of petrol and 50 percent of diesel demand, due in large part to the low utilization rates. As a result, the country imports a lot of refined products from foreign sellers.
The country usually spends more money on procuring crude oil and petroleum products from foreign buyers than any other commodity. But this import bill can be lowered if refineries were to operate near their design capacity by the reduced import of refined/finished products.
Five main oil refineries in Pakistan (BYCO, PARCO, NRL, PRL & ARL) are configured to produce mainly diesel, furnace oil, and petrol. Four refineries are based on hydro-skimming technology whose output is approximately 40 to 45 percent diesel, 30 to 40 percent furnace oil, and 15 to 20 percent petrol, based on the type of crude these facilities usually process. One has better technology and its furnace oil yield is estimated to be around 20 percent. Furnace oil, therefore, is one of the main products of these refiners.
The consumption of furnace oil is declining around the world. This global trend is unlikely to reverse and it has put Pakistan’s refiners in a difficult situation as the demand for furnace oil has reduced considerably. The furnace oil consumption fell under three million tons in 2020-21 from 9.6 million tons in 2016-17.
Each refinery, however, still produces 20 to 40 percent furnace oil whenever it processes crude. This created inventory management issues for the refineries and had to cut down refinery utilization.
Refiners have been slow to react to the changing market dynamics. They’ve had more than six years to reduce their furnace oil yield by upgrading plants, but they failed to do so. However, the government are also to blame which abruptly shifted the country’s energy mix in favor of LNG which has sharply declined the furnace oil demand. With the import of LNG in 2015, the furnace oil demand has plunged by nearly 70 percent.
Therefore, no meaningful increase in petrol and diesel production is likely to attain unless refineries are upgraded by installing fluid catalytic cracking and hydro desulphurization units to convert furnace oil into petrol and diesel.
Five main oil refineries operating in the country are based on hydro-skimming technology and all produce large quantities of furnace oil but the demand for this product has been declining. The industry, therefore, needs to upgrade its refining capabilities and produce high-value products. This will serve to increase their profitability and make the business financially viable in the long term.
Pakistan’s petroleum refining sector stands at a crossroads as its refineries need major upgrades so that they can meet the newly emerging requirements of more refined petrol, such as Euro V and VI.
The Pakistan government also requires that petrol sold in the country is at least of Euro-V grade. This calls for heavy investment-led upgrades in the refining capacities of oil companies so that they continue to remain in business. Consumers deserve to get value for their money at the petrol pumps.
Refineries play a pivotal role in the country’s energy sector. We need to do the much-needed upgradation so that they can full fill today’s product requirements and provide value-added products to the consumers.
It is expected that the landscape of all the refineries in the country will change within the next five years as plans are that upgraded refineries will be in full operation by 2026-27.
However, there is a need to come up with a grassroots refinery that is economically feasible without the government’s extra support and operates by competing refineries in the region meeting current quality requirements and likely future trends.