Interview with Mr. Barkatullah Lone — Chairman, GB International Economic Forum
Profile:
Mr. Barkatullah Lone is the Chairman of the GB International Economic Forum and a renowned young Economist of Pakistan. He was ranked in the top ten Economists in Pakistan in the year 2017. He is a Chartered Accountant from England & Wales, Chartered Management Accountant from the UK, Chartered Certified Accountant from the UK, Chartered Global Management Accountant from the USA, Gold Medalist Management Accountant and Public Finance Accountant from Pakistan plus he holds a master’s degree in Economics and Law from Karachi University.
He has been associated with the corporate sector in Finance and Audit profession in various positions (CFO/GM Finance/Chief Internal Auditor) for the last many years. He has rendered his professional Finance/Audit/Accounting services in Pakistan as well as abroad. Simultaneous with his job career, he has been appearing on various Local and International TV channels as an Economic & Financial Analyst for the last Eight years. His Articles on Economy and Finance are also published in various reputed magazines. Professional-level research has also been part of his career as he had been associated with various Universities including Bahria University, Hamdard University and ICMAP as visiting faculty prior to shifting to Saudi Arabia.
Association with Organization: Presently, Barkatullah Lone is associated with a reputed large Conglomerate Corporate Group in the Eastern Province of KSA (Dammam) as the Group’s Chief Financial Officer. He joined this Group with a vision to professionalize the business functions and streamline the Processes by embedding the business activities into integrated Information Systems. He has ample experience in converting the traditional owner-based culture into a corporate culture in his ex-organizations and he is envisioning inculcating a corporate culture in the existing Group as well.
PAKISTAN & GULF ECONOMIST interviewed Mr. Barkatullah Lone vis-à-vis refineries. The excerpts are as follows:
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. The five refineries can process up to 21 million tons of crude oil annually but their total output was around 13 million tons in the last financial year. This shows that the country utilized just around 65% of its oil refining capacity in the financial year 2022.
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. Moreover, the refineries also cause forex savings for the country by cutting down on the need to import expensive refined products. However, the refiners only satisfy around 30% of petrol and 50% of diesel demand, due in large part to the low utilization rates. As a result, the country spends a lot of cash on buying refined products from abroad which hurts its trade balance.
The above analysis reveals that the oil refineries are under-utilized which exerts massive pressure on the import bill of oil since we have to import refined oil in much quantum whose cost is more than crude oil.
The reopening of the global economy after pandemic-induced lockdowns and travel restrictions increased crude oil consumption. The surge in fuel demand has pushed oil prices through the roof. That’s weighing heavily on Pakistan, an oil-importing country. To make matters worse, the country’s oil refineries have been running well below their installed capacities forcing Pakistan to import expensive fuels. To soften the blow, policymakers should take measures that can help push refinery utilization higher. And this is true that the output of petrol and diesel would spike if the refiners modernize plants but to do that the refiners need to first make sure to utilize the existing available capacity to the fullest. Modernizing the plants by the refiners can bring big savings in the oil import bill subject to the fact that the refiners utilize the post-modernized capacity in its true sense and make sure that Pakistan reduced the import of refined oil and increases import of crude oil.
Refineries need to upgrade plants that will take their petrol and diesel yields higher while pushing their furnace oil output lower. The upgrades, however, are expensive and can cost anything between $200 million to $1 billion. The good news is that all of the publicly traded oil refineries have chalked up their upgradation plans and some have started construction work. One major refinery expects upgrades to increase its combined yield for petrol and diesel to 80 percent and reduce furnace oil yield to just 10 percent.
The oil companies have been waiting for the government to introduce a new policy framework that will give them the support and incentives required to complete the capital-intensive modernization projects.
Currently, five refineries are operating in the country with an overall installed capacity of around 450,000 barrels per day (BPD) oil and contributing significantly to meeting the petroleum needs through indigenous production.
The petrol consumption in the country is around 8.0 MTs per annum, out of which 30 percent is being catered from local refineries and the rest is being imported to meet the overall demand. Similarly, the consumption of diesel is around 7.6 MTs/annum. Local production can meet 65 percent of the total demand, while the rest is being imported.
Pak Arab Refinery Limited has 110K BPD oil refining capacity, Attock Refinery Limited 54K BPD, Byco 153K BPD, National Refinery Limited 65K BPD and Pakistan Refinery Limited 52K BPD.
The five main oil refineries as enshrined above are not operating at full capacity at the moment due to which Pakistan has to import a major share of oil in refined form. Plus almost all five refineries need investment to modify its plant which can increase the capacity further. In order to reduce the import bill of oil, the refineries need to modify its plant and ensure to utilize their production capacities to above 90%. As per rough calculation, the import bill of oil can be reduced by US$6 billion if the two aforementioned actions are taken by these refineries. The government needs to facilitate the refineries in order to do the needful and to reduce the trade deficit of the country.
Refineries play a pivotal role in Pakistan’s energy landscape just because the major share of electricity in Pakistan is produced using oil despite it being a nuclear country as France produces around 76 percent of its energy through nuclear use. Establishing more refineries and enhancing the capacity of the existing refineries can help us reduce energy costs. Our friendly country Saudi Arabia has recently assured us to invest around US$12 billion in refineries. If it is executed, there will be a major shift in the oil economy of Pakistan.