Oil refineries scale down operations amid COVID-19 lockdowns

This file photo shows tankers parked outside a local oil refinery in Karachi on Feb. 22, 2011. (AFP)

• Statistics reveal petroleum oil sales dropped by 33 percent on a yearly basis during March 2020
• PM’s adviser on petroleum says it is a demand-driven and temporary phenomenon

KARACHI: Pakistan’s declining demand for petroleum products has forced a majority of oil refineries in the country to go offline or scale down their operations, though a senior government functionary has described the trend as “temporary” while talking to Arab News.
Sale of petroleum products declined by 33 percent on a yearly basis in March 2020 due to the COVID-19 outbreak and the ongoing lockdowns, data released by the Oil Companies Advisory Council (OCAC) revealed on Wednesday.
The decline largely owed to 31 percent drop in the volume of High Speed Diesel and 62 percent drop in furnace oil on a yearly basis.
“We are not instructing anyone to shut down the operations,” Special Assistant to Prime Minister Nadeem Babar told Arab News on Wednesday. “It is market-based, demand-driven phenomenon and will be temporary in nature.”
Last week, Pakistan’s Ministry of Energy (MoE) said it had canceled imports of gasoline, diesel and crude oil from April 2020 onward to support the domestic refining industry amid declining demand due to the strict lockdowns.
Soon after that, local refineries informed the government about their stockpile. One of them, the National Refinery Limited (NRL), temporarily shut down its facility from March 25 while another one, Byco Petroleum, which is the largest refinery both in terms of its design and installed capacity, put its operations on “cold circulation,” the companies announced.
“We are on cold circulation which means that crude is passing through our machines with heaters off. In other words, we are not producing refined products but are in a position to restart the process immediately,” Shahryar Ahmed, General Manager of Byco, told Arab News.
Meanwhile, the Attock Refinery Limited (ARL) that mostly processes locally produced petroleum is operating at its minimum capacity. The organization’s chief executive officer, Adil Khattak, said the plant was operating at 29 percent and he was prepared to shut the complex in a week’s time if local demand did not recover, Reuters reported.
“The refineries are either closed down or operating at low level due to the subdued demand of diesel and gasoline,” Aftab Hussain, member of the Pakistan Refinery’s board of directors, told Arab News.
“The Pakistan Refinery is operating at a very low capacity,” he said, adding: “The refineries will boost their production capacity after the demand is restored, but it is not viable to do that at the moment.”
Pakistan has officially confirmed more than 2,000 cases of coronavirus with 27 deaths. The country is witnessing partial lockdowns since last week, resulting in a suspension of business activities and subdued energy demand.
“The oil consumption in the last 15 days of the month is down by an average 40 percent to 26,000 tons per day compared to the average consumption of 46,000 tons per day due to the lockdowns,” Topline Securities research shows.
However, analysts said the decline did not reflect the true picture which would become clear in the upcoming months.
“The government is expected to ease off the lockdown situation which may continue until May 2020. The petroleum sales statistics are not reflecting the true picture which may emerge in the upcoming reviews,” Samiullah Tariq, Director Research at the Arif Habib Limited, said.