Delay in refinery start-up could reduce tax holiday for Byco

Pakistan’s Federal Board of Revenue (FBR) has asked the government to give Byco Petroleum Pakistan Limited only a five year-tax holiday exemption instead of the seven and a half year-tax holiday granted by the Economic Coordiantion Committee (ECC) in 2009. Byco owns an oil refinery in Hub, Balochistan, which has a capacity of 35,000 barrels per day (b/d) The parent company, Byco Group, is relocating another oil refining and petrochemical complex and installing it adjacent to its existing refinery. The refinery has a capacity of 115,000-120,000 b/d. In 2009, the ECC granted Byco a seven and a half year tax holiday for the project on the condition that the oil refinery will be commissioned by the end of 2011. But the refinery was not commissioned last year. Byco cited weakening economic conditions in the country, which weakened the rupee’s value and adversely affected the capital cost of the project. Byco disclosed that because of the weak bank lending environment in Pakistan, it took the company a long time to arrange borrowing. Adding to this, because of the circulated debt crises that hit the oil sector, some financial institutions took over a year to disburse the funds. These caused several work slowdowns and cost overruns. However, Byco reiterated that some sponsors have injected additional equity amounting to Rs 2.25 billion (US$25 million) to the project. The Ministry of Petroleum and Natural Resources wants to give Byco the full seven and a half years tax holiday, which lasts till the end of this year. The ministry said that the project would help in reducing the gap between demand and supply of POL products, particularly high speed diesel fuel and motor gasoline. Pakistan’s Oil and Gas Regulatory Authority (OGRA) has given Byco three months to conduct an independent techno-economic study of the refinery to determine its financial viability and economic benefits to the country.
Byco expects to commission new refinery in June
Meanwhile, Byco announced that it plans to begin production at its new 120,000 barrel-per- day (b/d) refinery by the third quarter of this year, which will boost the company’s total refining capacity to 155,000 b/d. “The commissioning of the new refinery is expected by June 2012, while refining process will start from September this year,” said Qaiser Jamal, country head of the company’s refining business. Byco owns a smaller 35,000 b/d refinery near Karachi. The new refinery was relocated from Milford Haven, Wales, and is now being built close to the existing one. Byco bought the refinery’s units from Chevron at a cost of approximately US$750-US$800 million after it was shut down in 1997. The refinery will process mainly Middle East crudes, and its output will replace up to 60% of Pakistan’s imports. The country’s annual petroleum product demand reaches 20 million metric tons or 400,000 b/d. Out of this, only 15% is met through local resources and the remaining 85% is imported. Byco is also installing an isomerization unit at the new facility, which will convert naphtha into gasoline. “This will be the country’s first isomerization unit and has a capacity of 12,500 b/d,” Jamal said. (April 5, 2012)