Pakistan Refinery Limited (PSX: PRL) is a hydro-skimming refinery based in Karachi, Pakistan. Established in 1960, PRL processes imported and local crude oil into products like furnace oil, diesel, kerosene, jet fuel, and gasoline, with a capacity of 50,000 barrels per day.
The refinery operates at two locations: the main facility at Korangi Creek and crude oil berthing and storage at Keamari, ensuring efficient operations and logistics. PRL remains a key player in Pakistan’s energy sector, committed to meeting the country’s fuel needs.
PRL historical performance
Pakistan’s refineries have long faced challenges due to outdated technology, tight refining margins, and a credit crunch in the energy sector. In FY15, Pakistan Refinery Limited (PRL) grappled with falling crude oil prices and heavy inventory losses, resulting in a 36% drop in revenue and after-tax losses. However, a rights issue and the commissioning of an isomerization plant boosted gasoline production, improving liquidity.
FY16 saw PRL return to profitability, driven by higher gross refinery margins (GRMs) and increased petrol production from the new isomerization unit, despite lower oil prices. This momentum continued into FY17, with profits tripling, though production was hampered by catalyst deactivation in the isomerization plant.
FY18 brought mixed results: revenue rose by 32%, but profits halved due to depressed refining margins, exchange losses, and reduced furnace oil demand. FY19 was even more challenging, with steep losses of Rs5.82 billion due to weak refining margins, currency devaluation, and lower petrol prices. Despite this, PRL approved a Refinery Upgrade Project to meet EURO II compliance, and PSO became its majority shareholder.
The COVID-19 pandemic in FY20 led to plummeting demand, inventory losses, and regulatory challenges with EURO II compliance. PRL struggled with losses but continued to realign operations. FY21 marked a recovery, with improved revenue, better product mix, exchange gains, and reduced finance costs turning losses into profits.
FY22 was a standout year for PRL, with record revenues, profits, and throughput, driven by high GRMs, optimized production, and increased sales of diesel and petrol. In contrast, FY23 was marked by economic turmoil, currency devaluation, rising inflation, and operational hurdles, including LC issues and delayed payments. PRL’s expansion and upgrade projects to produce EURO-compliant fuels and double crude processing capacity faced delays, significantly impacting profitability.
PRL in FY24 and beyond
In FY24, Pakistan Refinery Limited (PRL) achieved significant growth and strategic milestones. The company reported a topline of PKR 306 billion, marking a 17 percent year-on-year increase, driven by volumetric growth. Earnings also improved significantly, reaching PKR 4.1 billion (EPS: PKR 6.45), compared to PKR 1.8 billion (EPS: PKR 2.90) in FY23. Operationally, PRL recorded a total High-Speed Diesel (HSD) production of 660,180 tons, with the highest average daily production at 2,013 tons. Motor Spirit (MS-92) production also increased, while MS-95 output included EURO-V-compliant volumes. The company focused on optimizing crude intake and reducing furnace oil production to enhance its profitability.
PRL made substantial progress on its Refinery Expansion and Upgradation Project (REUP), aimed at producing EURO-V-compliant fuels, doubling its refining capacity from 50,000 to 100,000 barrels per day, and incorporating advanced deep conversion technology to minimize heavy fuel oil production. The company has already spent $50 million on a feed study, which is expected to be completed by the second quarter of FY25.
Compared to FY24, FY25 began on a difficult note for PRL with the company facing a challenging first quarter. Net sales declined by 12 percent year-on-year, driven by lower petroleum product prices and record-low production of diesel and motor gasoline. While the cost of sales decreased slightly by 2.8 percent, it could not offset the revenue shortfall, leading to a staggering 99.4 percent drop in gross profit. Depressed global refining margins, falling crude oil and petroleum product prices, and a volumetric decline in the demand for diesel and furnace oil further exacerbated the situation. Operating profit turned negative due to a 41 percent increase in administrative expenses and a doubling of other operating costs. The company posted a net loss of Rs. 2.3 billion, reversing a profit of Rs. 4.5 billion in the same quarter last year, with all key margins suffering steep declines.
Looking ahead, PRL is progressing on its ambitious Refinery Expansion and Upgrade Project (REUP), aimed at doubling refining capacity to 100,000 barrels per day and producing Euro-V compliant fuels while reducing furnace oil production. The Front-End Engineering Design (FEED) study for REUP is expected to conclude by 2QFY25, with commissioning planned for 4QFY28. However, challenges such as policy delays, reduced throughput, and diesel smuggling continue to pose risks for the refining sector.
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