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Inconsistent policies by the govt are major hurdle in revival of economy.

Byline: M Naeem Qureshi

The CEO of Pakistan's major oil refinery Attock Oil Refinery says the government should make firm and consistent economic policies that must be investment friendly in order to bring more and more investment in oil and gas sector. While talking to Energy Update in an interview he says that.............

EU: What are the challenges you are facing for the development and progress in the sector in presence of other sources of energy?

AK: The crucial challenges confronted by the oil and gas industry including serious security concerns, inconsistent and retrogressive policies especially inadequate capacity of regulatory and government departments, unilateral withdrawal of concessionary duties and incentives that form basis of major capital investment, lack of clear cut down stream policy framework, circular debt issue in energy sector, lack of skills and technology including capacity issues of local vendors, poor infrastructure facilities including inadequate storage facilities/depots and massive congestion at ports.

In spite of the above challenges, ARL still went ahead and undertook Capital intensive Refinery Expansion and Up-gradation Project comprising installation/ Isomerization Unit (7,000 BPD), (to enhance production of Premium Motor Gasoline( PMG) by 70%); Preflash Unit (10,400 BPD), (to enhance refining capacity by 25%); DHDS Unit (12,500 BPD) to reduce sulphur contents in High Speed Diesel (HSD); and Expansion of existing Captive Power Plant (18 MW).

The total value of ARL's expansion and upgradation project is $251 million approximately and the project is in its final stages of completion.

EU: Why the govt could not benefit from falling POL prices for the last three years?

AK: The government did benefit from the falling of POL prices in the international markets. The falling prices have alone saved foreign exchange due to lower oil import bill to the tune of over $3 billion. The money thus saved could be spent on other goods and services.

EU: Why the consumers were not given price cushion of the rock-bottom prices of POL for the last three years?

AK: While managing its revenues from taxes on petroleum products, the government has given adequate benefit from the falling prices of petroleum products to the end consumers during the last few years. Prices of petrol and HSD have significantly come down during the last 3 years as per the given figures. Besides, power tariffs have also been significantly reduced due to decrease in prices of furnace fuel oil in the international markets.

Period###Product###Market Prices/Rs/Litre

October 2013###PMG ---------- 113.24 (Max)

March 2016###PMG ----------- 62.77

October 2013###HSD ----------- 16.95 (Max)

March 2016###HSD ----------- 71.12

EU: Why petroleum companies did not expand their business network despite historic price relief?

AK: This issue relates to Oil Marketing Companies (OMCs). Expanding retail networks and creating new storage facilities in the country have nothing to do with reduction in the oil prices. OMCs operate in Pakistan based on margins fixed by the government, which are still very low in comparison with other countries and need to be enhanced to an appropriate level for making the required investment in the above areas.

EU: What kind of govt. policies are the biggest hurdle in local as well as foreign investment in Pakistan?

AK: Lack of long term vision and policies and inconsistency in government polices is the biggest hurdle for investment in Petroleum sector duly hampered by bureaucratic and capacity issues. While the Upstream Sector has a formal policy framework, there is no formal policy framework for downstream sector. Focus is on day to day handling of issues rather than adopting a holistic long term approach.

EU: What was the reason that despite historic low rates of petroleum, oil consumption could not grow to the level as expected?

AK: As explained earlier in question 3 above, Pakistan's economy is growing at a steady rate and this growth is demanding higher energy consumption of the petroleum products in the country. The demand of motor gasoline and HSD is expected to grow at 10% and 2% respectively for 2016 and beyond.

It may please be noted that a record sale of motor gasoline of 553,000 metric tons was reported in March 2016 as against sale of 396,921 recorded in March 2015 last year.

EU: What were the circumstances that one particular oil company has been given monopolistic rights of retail outlets for 20 years on entire Motorway? Was it transparent under PPRA Rules?

AK: This is a policy issue and needs response from the concerned Government officials.

EU: Why your company stay away from bidding for the leasehold rights of Motorway?

AK: ARL is an Oil Refinery and not an OMC, hence this question is not related to us.

EU: Please share CSR policy and major CSR activities.

AK: Corporate Social Responsibility (CSR) is not a new concept for ARL; it has been part of the Company's core values since its inception. ARL's history of over 94 years is replete with CSR initiatives.

As per our policy on CSR, it is our foremost duty to consider the economic, social, ethical and environmental impact of our activities on our various stakeholders. ARL promotes community development to create the foundation for a more equitable, just, productive, competitive and knowledge-based environment. As a responsible corporate citizen, ARL has always believed in working as part of the community and all its CSR activities are sustainable in nature. ARL priority CSR areas are environmental compliance and energy management including renewable energy, health care, development of women skills, income generation, poverty alleviation, HRD, education, promotion of sports, provision of water, community development and conservation

EU: Kindly share your profile in detail including your educational background, professional experience and achievement?

AK: I have been associated with the Attock Oil Group in Pakistan for the last 39 years and become CEO in 2005. Prior to re-joining ARL as CEO, I worked for two years as Chief Operating Officer of Attock Petroleum Limited. I have extensive experience in engineering, maintenance, human resource management, project management and marketing.

I hold the positions of Chief Executive Officer of Attock Gen Ltd. (165 MW IPP), Attock Hospital (Pvt.) Ltd., and National Cleaner Production Centre (NCPC). Director on the Boards of Attock Information Technology Services Limited and Petroleum Institute of Pakistan (PIP). Also a member on the Boards of Governors of Lahore University of Management Sciences (LUMS), Ghulam Ishaq Khan Institute of Engineering Sciences and Technology (GIKI) Cadet College, Hasan Abdal, Sustainable Development Policy Institute (SDPI), Corporate Advisory Committee (NUST), Governing Council (PMQA), National Productivity Organization and Member Board of Studies, (Chemical Engineering) UET, Peshawar. Serving as President of Attock Sahara Foundation, an NGO, working for the poor and needy people of Morgah and its surrounding areas.

Holding a master's degree in engineering from Texas Tech University, USA have attended many technical, financial and management programs in institutions of international repute in Pakistan, USA, Europe and Japan.

EU: Detail of the products and services offered by your institution?

AK: ARL is producing a complete range of petroleum products comprising: "Liquefied Petroleum Gas (LPG), Export Naphtha, Premium Motor Gasoline (PMG), complete range of Jet Fuels (Jet A-1 and JP-8), Kerosene Oil, High Speed diesel (HSD), Light Diesel Oil (LDO), Jute Batching Oil (JBO), Furnace Oil including Low Sulphur Furnace Oil, variety of Asphalts including 60/70 and 80/100 grades, cutback asphalts, Polymer Modified Asphalt, Mineral Turpentine Oil (MTT) and Solvent Oil etc.

EU: What is your share/ rank in the market? Future growth of petroleum-sector in Pakistan?

AK: ARL share among local refineries production of finished products stands at 16.19% or 1.9 million tons per annum as per Pakistan Oil Report 2014-15. Total refineries finished products stand at 11.741 Million per annum during the above period. Pakistan's economy is growing at a steady rate and this growth is demanding higher consumption of petroleum products. Petroleum products consumption exhibited a growth rate of 5% on annual basis with consumption during 2014-15 recorded at 22.73 million as against 21.67 million during the corresponding period of 2013-14. The demand of energy products exhibited an increase of 8.12% during 2014-15, with transport and power sector being the biggest users with 50.59% and 40% respectively, followed by industrial and residential sectors etc. The demand of non-energy products exhibited a healthy increase of 14.9% during the above period.

As per the forecast given by Oil Companies Advisory Council (OCAC), the demand of motor gasoline and HSD is expected to grow at 10% and 2% respectively for 2016 and beyond.
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Publication:Energy Update
Geographic Code:9PAKI
Date:Jun 30, 2016
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