Volatility in the international oil prices made FY12 once again a topsy-turvy year for the refinery sector of Pakistan. The declining trend in refinery production continued for the 4th consecutive year with a slash of 5 percent in FY12 to 7.3 million tonnes.
“We believe, reduction in domestic gross refinery margins, particularly towards the later part of the year, stands out as the major reason behind constrain capacity utilization accompanied by liquidity problems of certain refineries,” said Topline analyst Nauman Khan.
Resultantly, he said, the country’s reliance on impacted petroleum production rose to 61 percent, up 100bps from last year. Overall uncertainty is surrounding the future direction of gross refinery margins and high regulatory risk faced by the sector.
The refinery production during FY12 declined by 5 percent to 7.3 million tonnes as against 7.7 million tonnes last year while capacity utilization declined to 65 percent as against 68 percent in FY11.
“However, there was a divergent trend amongst the individual refineries, with ATRL and PRL showing rise, while the other three major refineries (PARCO, NRL and BYCO) all showing decline in the production,” Khan said. During the year, he said, ATRL and PRL capacity utilization improved approximately 91 percent and 77 percent as against 88 percent and 71 percent in FY11, respectively. On the other hand, Byco capacity utilization declined to 14 percent as against 33 percent last year, with refinery remaining in-operational in large part of the year.
PARCO and NRL, capacity utilization declined to 63 percent and 76 percent versus 80 percent and 68 percent last year, respectively. We believe, former was with adverse operating environment on account of circular debt while the latter restricted its throughput due to lower margins. The trends in the throughput subsequently impacted on individual company’s market share. PARCO maintained its top-slot but lost its market share by approximately 1pps to 38 percent.
ATRL surpassed NRL to attain the 2nd as it improved its market share from 19 percent to 21 percent, while NRL maintained its market share around 20 percent. But the major gainer of the year was PRL, whose market share rose to 19 percent as against 17 percent last year. On the other hand, major loser was BYCO which lost its market share from 5.6 percent last year to 1 percent this year.
