· Management stated that LC and payment issues were prevalent throughout the year. Additionally, company encountered challenges related to non-upliftment of the RFO largely during winter periods. To address this, company is preparing a storage location in Karachi in order to export the said unwanted fuel oil on an as need basis.

· Refinery’s utilization stood at 78% during the year (FY22: 79%), which resulted in total production of 1.85mn tons (FY22: 1.87mn tons).

· Refinery policy was announced in Aug’23. Major points of the policy were as follows: i) Emphasis on upgradation to meet Euro-V standard of fuel, ii) Refineries undertaking upgradation within three months of notification shall be allowed to retain incremental CD of 10% on MS and 2.5% on HSD, and iii) Refineries are permitted to utilize up to 25% upgradation costs accumulated in the joint escrow account, the unutilized 75% will go on towards the IFEM pool.

· Company uses light/sweet crude, which usually yields high portions of MS and HSD (and subsequently low RFO)

· With regards to falling local crude availability (natural depletion etc.), company is working to source crude from southern based fields i.e. Badin crude of approximately 5k bpd. Company is presently awaiting approval from the GoP for this initiative.

· With regards to incremental duty specified in the refinery policy, refineries willing to avail the said benefits have to commit towards upgradation through opening an escrow account and provide a bank guarantee (of PkR1.0bn) before 16 Nov’23 (three months after refining policy notification)

· Cost of refinery upgradation is approximately US$500mn, however actual costs may be disclosed once EPC contractor is hired. With regards upgradation objectives, Continuous Catalytic Conversion unit, DHDS upgradation, Isomerization revamp and Kerosene treatment facility are in the plans.

· As ATRL is reliant on indigenous crude, expansion of the refinery depends on future availability of the crude in the KPK and Potwar region, which is currently around 41k bpd. Company has requested to divert the exported 5k condensate/crude from the south towards the company. Refinery’s ability to expand hinges on the assurance of future crude availability, as importing crude oil is currently not economically feasible.

· In case crude oil production in northern part of country continues declining, company has the option to source crude from southern part of country or even import from neighbors i.e. South Asia and Afghanistan if need be.

· Company is not considering bottom-of-the-barrel upgradation project (unlike other refineries). As per management, they are fully focused on upgrading to Euro-5 specifications, where they are currently being penalized by the authorities for producing HSD with higher than allowed sulphur content. Further, upgradation will enable conversion of the unwanted Naptha into more value-added Motor Gasoline

· Company is targeting 30:70 Debt to Equity for upgradation project.

Courtesy – AKD Research