Daily Times

KARACHI: In compliance with the government’s policy framework, the Attock Refinery Limited (ARL) has started supply of Euro-II compliant High Speed Diesel (HSD) to oil marketing companies.

The ARL on Monday informed its shareholders, through stock filing, that ARL upgradation project and operation of Diesel Hydro Desulphurisation (DHDS) Unit has commenced to produce HSD meeting low Sulphur (500 ppm) Euro-II specifications after successful performance test of the unit. Thus, the supply of Euro-II compliant HSD to oil marketing companies has been started by the company. Meanwhile, the government has been approached regarding some commercial modalities/clarifications by ARL in this regard.

ARL’s current nameplate capacity stands at 43,000bpd and it possesses the capability to process lightest to heaviest (10-65 API) crudes. ARL’s current expansion/upgradation projects comprises of Preflash Unit, Naphtha Isomerization Unit, DHDS Unit and expansion of existing captive power plant. This would increase refinery capacity by 10,400bpd, motor gasoline production by 20,000 tonnes per month besides enabling ARL to produce Euro II compliant low sulphur diesel.

“The company had successfully maintained the liquidity position since inter-corporate circular debt settlement arranged by the government in June 2013. Current ratio has decreased due to inventory losses; however, quick ratio for the year has improved as compared to last year. Keeping in view the challenging business environment along with the execution phase of ARL upgradation project, it was a difficult task to maintain the requisite liquidity ratios,” said the director of the company.

In March 2013, the government announced policy framework for upgradation and expansion of refineries. With effect from January 1, subject to the completion of DHDS project, the current 7.5% deemed duty on HSD would be enhanced to 9%, which may remain applicable till the envisaged complete deregulation.

It may be highlighted that the refineries had originally been allowed 10% deemed duty on HSD, which was subsequently reduced in 2008 to 7.5%. This incentive has supported the refineries in undertaking their projects for refinery upgrading and producing EURO-II compliant products.

The refineries have been directed that until completion of the projects, offsetting of losses, if any, for the year ended June 30, 2013, or subsequent years, would not be allowed against the amount of profit above 50% accumulated or to be accumulated in the special reserve account as per current pricing formula.

The National Environmental Quality Standards (NEQS) for motor vehicles were notified in 2009 and the Ministry of Petroleum and Natural Resources had committed to ensuring supply of Euro-II compliant diesel from January 2012.

This deadline was extended by the Ministry of Petroleum after getting approval from the Economic Coordination Committee on December 2014. The revised deadline had now long passed without any concrete steps being taken to meet the standards. At the moment, Pak-Arab Refinery is the only refinery in the country that is meeting 60 percent Euro-II compliant diesel requirements.