Naphtha delight

These columns recently highlighted the enormous boost to petroleum exports, particularly of naphtha that accounted for more than six percent of the total country exports for 4M FY14. The rise in the export of naphtha is even more attention grabbing when compared to zero monthly exports since July 2012, and highest monthly exports in October 2013 since at least December 2007.
The core reason for the rise in naphtha exports has to be better capacity utilisation owing to improved liquidity at refineries after the partial resolution of the circular debt. Even though the refineries were not as much replenished with government funds as was the power sector, better liquidity of the energy chain helped them increase refinery yields.
Remember that naphtha is produced as a surplus product from petroleum refineries. So the more crude the refineries in Pakistan refine, the more naphtha comes out as a byproduct. This gives a hint to another plausible reason for sudden surge in naphtha exports by the country.
It seems that the E&P sectors focus is shifting to more lucrative oil production; the first four months of FY14 saw an amazingly higher crude oil production by a country that is gas driven. During 4M FY14, average oil production increased by an impressive 14 percent year on year. And with sanguine hopes from key oil fields, the market expects crude production in the country to cross record 100,000 barrels of oil per day by the end of FY14.
So, the more the crude oil is produced, the more would be refined by the refineries, and thus more naphtha would be available for exports. Also, the element of higher global demand of paraxylene (PX), which is produced after value addition in Naphtha, could be another reason for higher naphtha exports.
New PX capacities particularly in India, Saudi Arabia and Middle East are due to commence operations soon, which should boost naphtha imports by these countries. Considering that Pakistan already exports naphtha to Middle East, Far East and South Asia, one is tempted to put the two and two together. But, instead of jumping to conclusions, best to wait and see what lies in store for naphtha exports.