Refinery sales record flat growth in May

Posted on June 14, 2011. Filed under: Fossil fuels |

KARACHI, June 13: Sales of the country’s refinery sector saw almost a flat growth in the month of May, or a minor decline of 0.4pc to 666.3 thousand tons, the recently released numbers by Oil Companies Advisory Committee showed.

Petrol sales took a bigger plunge of 9.8 per cent on account of reduced sales by the National Refinery Limited (NRL). Fault in NRL platform forced the company to limit its sale to just 2.3 thousand tons of petrol (down 75pc over the earlier month). “Though the company is working on fast-track basis to overcome the problem, but reduced petrol production cannot be ruled out for June as well,” said Nauman Khan, analyst at Topline Securities.

This in addition to month long plant maintenance shutdown of Attock Refinery (ATRL) and three-day plant shutdown of PARCO on account of ‘pricing dispute’ resulted in petrol supply shortage in early part of June.

During 11MFY11, throughput (production) of all refineries combined declined by 4.7 per cent to 7.1m tons as against 7.5m tons in same period last year, with average capacity utilisation at 69 per cent.

ATRL and NRL witnessed an increase in their throughput by 2.8 per cent and 23.3 per cent, respectively, while other refineries ended in throughput shortfall.

PARCO, country’s largest refinery, faced a month-long closure on account of devastating floods while BYCO and PRL conducted their plant maintenance shutdown during the year, which restricted their throughput.

During the period underreview, PARCO, BYCO and PRL sales declined by 9.9pc, 34.4pc and 5.1pc, respectively.

On MoM basis, refinery throughput showed a minor decline of 0.4pc in May to 666 thousand tons as against 669 tons in April. The noticeable feature was a sizeable 9.8pc decline in petrol production with major culprit being NRL.

On account of fault in its petrol platform, company petrol sales plummeted by a significant 75.4pc. However, company’s overall sales increased by 7.8pc with lost ground being covered by up tick in FO (Furnace oil) sales which is a loss making product.

The change in the sales mix towards FO would have a negative bearing on company’s FY11F earnings, says the analyst.

Another notable change was decline in Pakistan Refinery Limited (PRL) sales by 42.5pc to 63.6 thousand in May as against 110.6 thousand in April.

The industry sources suggest that the decline is primarily attributed to maintenance activities.

PARCO, and ATRL throughput increased by 1.4pc, 2.0pc, while BYCO sales surged by a massive 141.2pc.

“Given that the fault in petrol platform is still to be overcome in NRL, we expect reduced petrol sales in the month of June as well,” says Nauman, adding that according to industry sources, NRL is working on fast-track basis to overcome the fault and restore its petrol production.

However, June sales were expected to remain subdued.

Another industry report released by Farhan Bashir Khan at InvestCap stated that as per latest figures available, local refinery production went down by 4.5 per cent monthon-month (MoM) in May while sales were also nominally down by 0.4pc MoM as previous inventories were retired.

The decline was visible in the mainstream petroleum products, including motor gasoline (down 10pc MoM), high speed diesel (down 6pc MoM) and aviation fuels (down 12pc MoM).

On the other hand, overall decline in industry sales was restricted by virtue of 15pc MoM increase in sale of furnace oil.

The shift towards higher furnace oil sales also distorted the white oil yield of the sector which went down by 19pc MoM.

“Likewise, the white oil yield has been lowest since September 2010 when petroleum output was disturbed due to floods in the country,” stated analyst Farhan.

Refinery sales slipped by 4.3pc during in the 11 months of the current financial year over the earlier similar period, while Mogas and FO sales were down by 6.3pc YoY and 3.7pc YoY, respectively.

In terms of individual refinery-wise performances, highest decline was visible in PRL’s sales, which dipped by a massive 41pc MoM, where Mogas sales dropped by 45pc MoM.

Other fuels, such as HSD and FO, also witnessed a significant drop of 59pc MoM and 17pc MoM.

The decline was somewhat compensated by higher sales posted by NRL, the refinery benefiting from 50 per cent MoM higher sales of FO while its own sales of Mogas recorded fall of massive 75pc to mere 2.5k tons (2pc of industry gasoline sales during May, compared to average 10pc).

The analyst was also of the view that higher mix of furnace oil would affect refinery margins adversely. Farhan at InvestCap stated that discussions with industry sources had revealed that the decline was primarily attributed to fault in plat-former unit of the refineries, including ATRL, NRL, PRL and BYCO.

While the problem is addressed at NRL, maintenance work continues at ARL. The unit is primarily used to process low octane naphtha into high octane gasoline fuel and is apparently the prime reason for gasoline supply deficit in May, worsening off in June.

The maintenance work was expected to be undertaken throughout the month of June, which had already resulted in excessive shortage and called for additional import of gasoline.

The said pattern in refinery sales was anticipated to have negative implications on sector profitability.

Dawn.com

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