Financial Analysis of Attock Refinery Limited

Topics: Petroleum, Oil refinery, Diesel fuel Pages: 9 (3840 words) Published: February 13, 2009
Economics of Energy Pakistan is in a record economic transition since 1999. The GDP grow with the average rate of over 7.5 percent during last four years while we expect GDP growth rate would be 6.2 percent for current financial year. Even though this growth is backed by boom in service sector, it is imperative that sustainable growth in GDP would be achieved by the process of continuous industrialization and energy is the most essential element to push this process forward. Thus Pakistan is currently in need of energy resources and its growing demand in the country is putting widening pressure on the deficit. Pakistan’s total energy consumption has increased by 37 percent to 36MTOE in FY07 from 26.3MTOE FY03 which is indicting the growing energy needs of the country during last four years. As a matter of fact, Oil & Gas are two main dominant sources of the energy for Pakistan’s industrial segment and presently cater 70.2 percent of the total energy needs of the country. Other than these two remaining is covered by hydroelectricity which contributes for 16.2 percent, coal 10.6 percent and LPG 1.8 percent of the total energy demand. It is noteworthy here that shares of hydroelectricity and coal are low, despite the country’s large hydropower potential and substantial coal deposits which have been discovered at Thar in the province of Sindh. Under present state of high international oil prices, it is definitely a desirable option to diversify the sources of supply, so as to reduce oil portion from the energy mix and alternatively acquire energy from coal and hydroelectricity. This will provide not only strategic bene-fits in terms of fuel substitution but also help ease the heavy import burden on economy. In fact, during the last four years, we do observe substantial changes in total energy consumption mix of the economy. Becoming less dependent on oil and more on gas, Pakistan was fulfilling it’s total energy needs by 41.3% from oil, 34.6% from gas and 6.4% from coal in 2003 which is currently altered to 29.4%, 40.8% and 11.5%. As evident, this change in energy mix was mainly due to government polices to reduce county’s dependency on the oil as an energy source. Total Energy Consumption vs. GDP Growth {draw:frame} Macro Economic Impact It is beyond doubt that oil sector play a vital role in development of any economy. Being a net importer, given the high level of import that is more than 80 percent of total demand, Pakistan’s economy is very vulnerable to fluctuation in international crude oil prices and petroleum products. The economy is facing major challenges, owing to international oil prices which has recently breach historic high level of US$ 108 per barrel. Pakistan’s oil import bill is likely to rise to US$9.2billion (bn) during FY08, relative to US$7.4bn marked during last year which is mainly due to massive upsurge in international oil prices. Government is continuously subsidizing POL products since January 2007 when crude oil prices were at US$ 60 which has now crossed US$100. Owing to which government is facing crucial problem in maintaining its budget deficit during the current financial year. Historic Oil Import Bill {draw:frame} Oil Refining The Evolution Petroleum refining has evolved continuously in response to changing world dynamics in terms of technology, globalization and consumer choice for better and efficient products. In its early stages, refining was used to produce kerosene as a cheaper and better source of light than whale oil. With the dawn of industrial revolution more than a century ago, the birth of the internal combustion engine led to the production of gasoline and diesel fuels. Motorization followed by aeronautics created an initial need for high-octane aviation gasoline which later on took the form of jet fuel, a sophisticated form of the original product, kerosene. Present-day refineries produce a variety of products including many required as feedstock for the...
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