‘We have long-term plans of investing in infrastructure expansion’

Adnan Samdani is the GM of FOTCO. He joined FOTCO in January 2022. He has over 25 years’ experience in financial management, strategy, planning & business development and operations. His previous experiences include working for Engro Chemicals, ICI Pakistan Limited, LOTTE Chemicals and Khaadi Pakistan Limited, where he has held several senior Financial and Commercial roles. In his last role he served as Chief Financial Officer and Company Secretary.

In his previous roles, he was responsible for creating strategies for business development & corporate restructuring and combined with several years of experience in finance, commercial, legal, information technology, treasury and compliance have been instrumental in delivering results. He has also served as Lotte nominee Director on Lotte Kolson’s Board. He did his Bachelor’s in Chemical Engineering and Economics from University of Rochester, USA, and later pursued MBA (Finance) from Institute of Business Administration, Karachi. He is also a certified director of Corporate Governance from the Pakistan Institute of Corporate Governance.

Following are the edited transcripts of a recent conversation BR Research had with Samdani:

BR Research: Why do you say that FOTCO is a national asset?

Adnan Samdani: FOTCO commissioned in 1995 with an investment of almost $100 million. It is a state of the art, environmental friendly marine oil handling terminal at Port Qasim. It is a joint venture of Fauji Foundation and Infraavest Ltd. of Hong Kong, with Fauji Foundation as the majority shareholder. The original idea was to build a jetty for handling of imported Petroleum Products. As Pakistan is a net oil importing country, FOTCO holds strategic national importance, and the economic activity of Pakistan is highly reliant on continuous functioning and delivery by FOTCO Terminal. Pakistan imports approximately 60-70 percent of its petroleum needs out of which FOTCO handles 100 percent furnace oil imports; 98-100 percent of diesel imports, and 45 percent of Mogas imports with 55 percent of imports handled at KPT.

We consider ourselves as a key component of the value chain. Over the years we have spent millions of dollars to ensure 100 percent berth availability, throughout the year. We have handled over nine million metric tons of petroleum products annually many times over the 27 years and we believe that the all-weather jetty has the capacity of handling the entire country’s petroleum imports which is currently around 12 million metric tons of finished POL products annually.

Port Qasim is a very unique port because of its geographic location. It is one of the ideal facilities because of the infrastructure connectivity be it the road or rail network or the PAPCO white oil pipeline. This makes FOTCO a key player in the entire supply chain and a national asset.

BRR: What are the key challenges and constraints that FOTCO faces today?

AS: Unfortunately, we have not been able to realize our full potential because of certain internal and external challenges, which has kept our port handling numbers around 8-9 million tons annually. We have been working tirelessly to address the internal constraints to enhance efficiency in vessel handling operations. Externally, the lack of fully operational night navigation facility and unavailability of additional navigation channel at Port Qasim restricts our vessel handling capacity, leading to port congestion. Port Qasim is actively working to address the situation and ensure efficient berthing and sailing of ships. They are also exploring option of an alternative navigation channel to ensure smooth flow of traffic and avoid congestion. Also, we need night navigation with additional pilots appointed by Port Qasim Authority. After 27 years, Port Qasim and FOTCO terminal were hand-in-hand able to do night navigation of five vessels in the past 3-4 months, which is a first in Pakistan. In order to fully operationalize night navigation, FOTCO and PQA are in process of conducting navigation simulation studies from Europe.

Another challenge that we face is the small size and low pumping capacity ships. The increase in average parcel size of ships, compounded with better pumping rates can actually result in increased throughput handling at FOTCO and reduce ship turnaround time. The better the pumps, the quicker will be the discharge of the product by the ships, which will improve the efficiency and utilization of the jetty.

We are working in close coordination with all the stakeholders including Port Qasim, OGRA, Ministry of Petroleum, OCAC, and OMCs to determine the immediate and short-term measures required to address ship handling and congestion challenges. FOTCO currently handles 15-16 ships carrying POL products with an average size 45,000-50,000 tons vessel per month. And we are confident that these immediate measures can take this number to 20 vessels, which roughly translates into additional 200,000 tons per month or 2.4 million tons annually. It is therefore evident that our current capacity of9million tons can be easily increased to 11-12 million tons annually.

Additionally, effective planning of POL imports can also have substantial impact in resolving the congestion issues. Besides the operations constraints, there is also the cargo sampling constraint of the petroleum products especially during the monsoon season as the sampling test is done at the port and not the outer anchorage. For that FOTCO has proactively partnered with the petroleum division’s testing arm, Hydrocarbon Development Institute of Pakistan (HDIP) to start quality testing and sampling at outer anchorage with to save time. The matter now resides between OMCs and HDIP for successful implementation.

We are thankful to the Petroleum Division, Ministry of Maritime Affairs, OGRA and PQA for understanding our challenges and the support in resolving our issues.

BRR: How do you address the lack of investment blame hurled at FOTCO?

AS: FOTCO is a state-of-the-art terminal that is well maintained and is comparable to the world class facilities elsewhere. Our repair and maintenance regime run into millions every year. Moreover, we have recently entered into an infrastructure modification project which will be commissioned in few weeks and will address the contamination issues.

FOTCO has already invested millions of dollars in the RLNG pipeline, also a national asset, and in the development of 108,000 tons oil storage facility which has significantly contributed to the overall oil handling infrastructure at Port Qasim.

With regards to adding a pipeline or a new jetty at this stage, the factual data suggests that a new pipeline would not add much to the terminal’s efficiency till such time the other constraints remain unresolved. FOTCO would be first to invest in a new jetty when the existing infrastructure is optimally utilized, and the import volumes justify the need.

BRR: Was diesel shortage just recently due to port congestions?

AS: As the industry already clarified previously, the shortages are not mainly due to port congestion but yes shortages are nothing new. We face such shortages time and again and more effective planning and forecasting of the overall energy needs of the country at national level can minimize such scenarios in future.

Moreover, the port congestion remains a significant issue and needs to be collectively addressed by the importers, port operators, regulators and other stakeholders. It is important that all key stakeholders work hand in hand to address the short-term measures that can not only enhance incremental import volumes (2-3 million MT per annum) but also provide relief to the national exchequer in terms of demurrage cost savings etc.

BRR: Coming to LNG, is there a need for more LNG terminals due to port congestion?

AS: More LNG terminals will increase port traffic, resulting in increased congestion. From demand point of view, it may make sense. LNG has a direct impact on furnace oil imports; the demand for furnace oil depends on LNG dynamics. Port Qasim has two terminals that handle LNG. I believe that more than a need for more terminals for LNG, there is a need to address the support infrastructure challenges. FOTCO has invested in a $30 million LNG pipeline for FRSU terminal that is connected to SSGC network. Our investment can take double the volumes but investment in support infrastructure is needed to make that happen.

LNG shortage results in increase in furnace oil imports in the country which effects other POL import shipments. And as I mentioned100 percent of the furnace oil imports are through FOTCO terminal.

BRR: What are your plans going forward?

AS: We have big plans in line with the national energy needs. With regards to FOTCO, our short-term aim is to optimally utilize the existing infrastructure and maximize throughput handling in order to facilitate the importers and address port congestion.

Furthermore, we have discussed other proposals with the government which can resolve the supply chain issues in medium to long term. One of which is the international bonded storage concept which will allow the international suppliers to bring in POL products in Pakistan, store at our facility and make it available for the local market. This way we can have sufficient stocks present in the country for immediate procurement and to avoid any shortages, without exposing ourselves to currency fluctuation impact. Plus, we can save significant precious foreign exchange by minimizing demurrage costs upon OMCs.

In addition, we have made various representations on the concept of buffer storage tanks, which will have direct impact on ship turnaround time.

We have long term plans in investing in infrastructure expansion, given the overall energy dynamics of the country. We are currently reviewing the business models of world-class similar facilities elsewhere, which have over the years integrated with both upwards and downwards value chain.