Investing In A New Energy Future For Pakistan
The consortium that NVEC has put together have the experience, financial capabilities to be able to fund the equity capital in to acquire as well as finance the funds required to build and setup a new High Conversion Refinery. YAMATA group will be the EPC and Lukoil who will provide crude supply and will other logistical support. We have picked SAMSUNG as our Refinery supplier.
YAMATA Yatirim was founded in 1999 in Istanbul / TURKEY, at first to have a share in the construction market of Russian Federation where more than 450 projects are successfully completed within the last 15 years of operation which made the company one of the leading construction company in Russia. This allowed YAMATA to enlarge its activities to the international market (CIS countries, Middle East countries and North African countries)..
LITASCO has affiliates in Kazakhstan, Singapore, the United Arab Emirates, the United States of America, the Netherlands as well as representative offices in Hong Kong, in Russia and in India. LITASCO Group is one of the world's major traders of crude oil and refined petroleum products and deals with a vast range of suppliers and customers, including all of the world's major oil corporations. In 2018, the LITASCO Group traded over 96 million metric tons of crude oil and 86 million metric tons of petroleum products.
New Vision Energy Company (Private) Limited (NVEC) was incorporated in Pakistan in September, 2019 as a Private Limited Company. The company is licensed to operate as a company focused in Investment in Natural Resources and Mining. Currently it is in the process of to acquiring a major stake in a company approved by the Oil and Gas Regulatory Authority to operate as an Oil Marketing Company (OMC) and a Refinery. The OMC is principally engaged in procurement, storage and marketing of petroleum related products.
The main premise and thesis for this investment at this time is that Pakistan is in a contrarian position to other markets per the post COVID scenario in the refined products sector. Keeping in mind that the recovery is expected to be L shaped, the country could benefit greatly from having a modernized high conversion refinery that can supply the refined fuels, petrochemical and Agricultural sectors. Pakistan today is a country of 215 million people and does not benefit from having a Modern Refinery. The target refinery is heavy oil low conversion plant fitted with 1960’s technology. The main output is fuel oil, which is largely being phased out in Pakistan. Today Pakistan imports $15 billion USD of refined products mostly from Aramco and Abu Dhabi, import transactions that were consummated in the 1980s and til today have not be updated. These trading deals come at a heavy cost to the country in terms of loss on capital as a large part of refined product costs are subsidized.
Projects Completed By Consortium Partners
Oil Group partner
The Case for Modular Mini-Refineries
Despite the generally poor returns from petroleum refinery investment, modular mini-refineries, from simple diesel production units to more sophisticated cracking refineries are increasingly becoming a flexible and cost-effective supply option for crude producers in remote regions. This is particularly where there is a need to adapt rapidly to meet local demand. Relatively low capital cost, speed and ease of construction are key advantages of a modular mini-refinery.
Two 30,000 bpd1units producing high octane unleaded gasoline, LPG, diesel, kerosene and fuel oil can be installed in an 18 month time window, with a budget of 200 million dollars. Modules from 4,000 bpd up to 30,000 bpd primary distillation capacity can added together with debottlenecking to create a refinery of 100,000 bpd or more, should demand dictate. The conditions required to make such an investment workable typically include: a location in close proximity and with access to crude supply; near to sizable markets with logistic advantages—decreases high distribution costs in remote regions; project finance on preferential terms from development credit agencies and almost certainly some government incentives to support regional development.
A Challenging Sector
The petroleum refining sector has undergone significant rationalization in the last three decades. In the 1980s and 1990s surplus refining capacity globally triggered increasing competition among refiners and declining margins. Weak commercial conditions, together with tougher environmental regulations, led to closure of the majority of the less efficient, smaller refineries worldwide. The historically low returns, typically below the cost of capital, also resulted in significant under- investment in the sector and industry concentration with re-investment only into the larger, more efficient complex refineries.
In recent years, despite increasing oil prices and demand growth for refined products, particularly in developing markets, there has been significant volatility and continued the overall declining trend in refinery margins. Short-term improvements have not been sustained and are insufficient to stimulate grass-roots replacement of the aging refinery asset base.
Meanwhile, as a consequence of global economic trends, the majority of the new capacity is now coming on-stream in Asia and the Middle East, where demand growth is greatest. There are few viable green-field projects in Europe and North America, where demand is stagnant and the regulatory hurdles are numerous. In spite of this, changes in product slate combined with tighter specifications mean that many refineries in these regions are still required to invest in upgrading of their operations as a cost of staying in business.
At the same time, there are a number of other non-economic drivers for refinery investment. Often this is as a consequence of government intervention, for example - changing environmental legislation or investment incentives to mitigate security of supply issues. In other cases companies appear willing to invest in the refining sector with marginal economics to achieve parallel objectives, such as the Chinese investing in African refineries seeking to get access to upstream resources.
Adding-up the Numbers
The overall economics or viability of a refinery depends on the interaction of three key elements: the choice of crude oil used or crude slate; the complexity of the refining equipment or refinery configuration; and the desired type and quality of products produced or product slate.
Today, Pakistan has a total refining capacity to process around 400,000bpd or about 19MTPA of crude oil, against the current demand of 24MTPA. Total global refining capacity is 97 million bpd, and Pakistan, with nominal world share of 0.4 percent, is ranked 48th. Demand for oil products in the country is expected to grow steadily at seven percent on year-on-year basis, according to recent studies, in particular for the furnace oil, motor spirit, diesel and aviation fuel, which accounts for 78 percent of total oil demand. Thus, the demand-supply gap will continue to strain heavily on the imports in future, if oil refining capacity is not added at a large scale.
Global refining capacity is expected to reach 115 million bpd by 2020 despite low crude oil prices and consequently the gloomy scenario for the oil and gas sector. It is however speculated that the global trend of declining oil prices would be arrested in the near future. Interestingly, most recent oil refining capacity additions have taken place in the Asia-Pacific region. Pakistan should therefore be no exception as future energy consumption poses a serious challenge for the nation, and refining margins are high.
Currently, there are seven oil refineries operating in the country. Major players in the sector are Pak-Arab Refinery Co Ltd (Parco) of 100,000bpd (4.5MTPA), National Refinery Ltd (NRL) of 64,000bpd (2.9MTPA), Pakistan Refinery Ltd (PRL) of 47,000bpd (2.1MTPA), Attock Refinery Ltd (ARL) of 43,000bpd (1.9MTPA), Byco Petroleum Pakistan Ltd (BPPL) of 35,000bpd (1.6MTPA) and Byco Oil Pakistan Ltd (BOPL) of 120,000bpd (5.4MTPA) output capacity, which was commissioned in June 2015.
The refinery operations will continue to be managed by refinery in-house team. The refinery management is highly experienced both from technical standpoint as well as in terms of familiarity with the local market conditions.
Company shareholders also represent highly experienced companies with knowledge of entire value chain from import of crude to distribution of refined petroleum products within the country.