PAKISTAN ENERGY CONFERENCE 2016
PAKISTAN ENERGY MIX Pakistan s Annual GDP growth 4.2% in 2014-15 Pakistan s Energy Mix During FY14-15 Hydro, Nuclear & Others, 13.40% Coal, 5.40% LPG, 0.50% Gas, 46.30% Oil, 34.40% Source : Energy Book Pakistan Energy Mix FY 2014
PAKISTAN ENERGY DEMAND With the Expected GDP growth rate of 4.5% to 6.5%, Pakistan s energy appetite is expected to grow at an ACGR (Annual Compound Growth Rate) of 4.3% to 6.0 % Source : Energy Book / Petroleum Institute of Pakistan MMTOE : Million tonnes of oil equivalent
OIL MARKETING BUSINESS IN PAKISTAN Downstream annual sales of Petroleum Products in Pakistan exceed Rs. 1 trillion, employing more than 124,000 people (directly/indirectly) in the industry. Petroleum Sector contributes more than Rs. 200 billion towards taxes. Country Petroleum demand is met through Imports and 5 local refineries. Currently there are 13 downstream Oil Marketing Companies. Pakistan has over 7,300 retail outlets spread from Karachi to Jaglot. Pakistan has storage capacity of over Million MT, making 15 days reserves. Regulated Margins are Rs. 2.35 per liter on HSD and Petrol Source : OCAC oil Report
BAKRI PAKISTAN The group was founded in 1973 and has presence in Middle East, South East Asia and Far East Regions. Bakri Group s principle business segments are in the energy sector, the marine sector and the investment and services sector. Bakri Group s entered Pakistan 25 years ago with Black Oil Fuel supplies to PSO. Bakri established Oil Marketing Companies in 2005. Bakri business activities in Pakistan include: -procurement from local and international suppliers -Storage and supply of petroleum products -Retail and Consumers business -Supply to power generation companies -Marine and Aviation Business -Lubricant Business
SUPPLY AND DEMAND OUTLOOK Demand in 2005 was around - 7.7 million MT HSD & 1.3 million MT PMG - 47% was imported and 53% was locally produced Demand in 2015 was around - 6.9 million MT HSD & 3.9 million MT PMG -Demand for HSD has reduced by 11% vs 2005, PMG demand has increased by about 200%. overall growth in the Industry is around 16% since 2005. Retail Outlets in Pakistan have grown from 5,670 to 7,341 during the period 2005 to 2015 (1,671 petrol pumps) Around more than three million cars have increased on the road since 2005. (4,539,000 vs 1,246,000) Three million bikes have been added to the roads since 2005. (6,020,000 vs 3,063,000 ) Source : OCAC oil Report
PRE REQUISITES FOR ESTABLISHING AN OMC Investment capacity must exceed Rs. 500 million rupees for initial period of three years, based on the criteria of 60:40 debt/ equity ration. Clear Investment plan on development of depots, installation etc. to create minimum storage of 20 days of their proposed sales, within 3 years. Upliftment of all product first from local refineries before importing. Marketing plan for secure supply arrangement and development plan for over three years Provisional Marketing license for 3 years before confirmation. Source : OGRA Requirements
STEPS IN CONSTRUCTING RETAIL OUTLETS Step 1 Apply NOC to Commissioner. Departmental approvals of water, electricity, revenue, Civil Defense and Explosives. 4 month process. Step 2 After NOC is received, Lease agreement is made between Dealer and OMC and registered with local authorities. 1 month process. Step 3 After Lease registration, application for construction approval is obtained from Explosives. 1 month process. Approval is valid for 6 months for completion of construction. Step 4 construction is inspected by the Explosives department after completion and license is issued to undertake sales. 2 months process. In present system from selection of site till sales can start it takes approx 12 months. Source : OGRA Requirements
CHALENGES TO SMALL OMCS Development of infrastructure while selling the product. High operating cost per litre Import of small cargoes New companies will have no shareholding in existing refineries; thus less influence to get the product
92 RON MOTOR GASOLINE IN PAKISTAN Advantages. Lower fuel consumption Less Carbon emission and Environment friendly Disadvantages. Refineries presently are not capable of producing 92 RON except PARCO Since Refineries are not equipped to blend hence HOBC would have to be imported. Approx. 1 million MT of Motor Gasoline of 97 RON will have to be imported to mix with 87 RON to make RON 92, which will increase the import bill Price of 92 RON will be higher for consumer than present 87 RON. Approximately 60 percent of vehicles on road are motor bike, and out of the total cars a large percentage is of the old cars which do not require the higher RON fuel.
EURO II DIESEL Road Transport results in 20% of all CO2 emissions Euro II fuels will reduce the sulphur content from 0.5% presently to 0.05% India has already introduced Euro III (0.035% sulphur) whereas China has introduced Euro IV (0.005% sulphur) Presently 38% of HSD is imported whereas 62% is produced locally Only PARCO has capability to produced EURO II rest refineries would require major up gradation which would take approx 18 months. EURO II diesel should only be imported once local refineries are equipped to produce the same. Otherwise sulphur content may reduce slightly and price will go up with insignificant affect to environment.
RECCOMENDATIONS To encourage foreign investment in Oil Marketing Industry, government must evolve one window facility with incentives Government to provide incentives to new oil companies and those who opt for alternative energy. Incentives must be given to those who are using energy saving equipment e.g. lighting, pumps, dispensers, service stations Local Refineries to support Small OMCs on basis of their demands rather than placing priority over the size of company Tax Incentives for first 3 years to a new OMCs Tax benefits should be given to companies constructing Rural sites Capability of local refineries be enhanced through time-bound fiscal support to enable them to produce better-quality fuels