Byco Petroleum Pakistan Ltd (KA:BYCO) dominates Pakistan’s oil refining landscape. Moreover, the Karachi-based company, which trades on the Pakistan Stock Exchange and carries a market cap of almost $700 million, is the owner of Pakistan’s first and only Single Point Mooring (SPM) facility which it uses to directly import crude oil for its refineries.
That’s in contrast to other energy companies in the country who rely on fixed sea ports for imports.
The Karachi-based Byco is Pakistan’s largest refiner, in terms of capacity. The company’s refining complex that’s spread over a thousand acres near the coast of Hub, in the province of Balochistan, houses two refineries – a newly constructed plant that can process up to 120,000 barrels per day of crude oil and Byco’s original refinery, processing 35,000 barrels per day. The company alone can meet nearly 27% of Pakistan’s petroleum products demand.
Byco’s flagship asset is its refining complex which accounts for more than half of the company’s revenues and a little less than 90% of its profits. The remainder comes from Byco’s petroleum marketing business which includes a network of more than 310 retail outlets that are located across Pakistan.
The SPM facility, on the other hand, doesn’t generate any revenues for Byco but it is still a key asset. In fact, Shehryar Ahmad, Byco’s Head of Communications, has said that the SPM is one of Byco’s “major strategic advantages.” The SPM is a large metallic buoy anchored in the deep sea, around 15km from Byco’s refining complex, which takes crude oil from vessels and transports it to the company’s refineries through an 11.5km offshore and 3.3km onshore crude oil pipeline. The SPM has considerably improved the efficiency of Byco’s operations by allowing the company to capture significant cost and time savings.
Instead of using the fixed jetties at sea ports, such as the Karachi Port or Port Qasim, for importing crude oil, paying toll and related charges and incurring crude oil transportation costs by using pipelines of other energy companies, Byco uses its SPM facility and pipelines to bring oil to its refineries. Moreover, Pakistan’s two main oil importing ports – Karachi Port and Port Qasim – frequently experience congestion which causes significant delays in crude oil deliveries. But the SPM has no traffic-related problems. The floating port can transfer the load of even the largest crude oil vessels to Byco’s plant within a few days.
In some ways, the SPM is even better at handling crude oil tankers than the fixed jetties at Pakistan’s sea ports. For instance, unlike other ports of the country, the SPM does not rely on high tide for berthing and un-berthing of oil tankers. The SPM is also accessible from all sides, all angles and against tide flows, which is in contrast to the sea ports. In addition to this, the SPM, which has a maximum water depth of 25 meters, can also handle the VLCCs (Very Large Crude Carriers) whereas Pakistan’s existing ports, which have an average water depth of around 13 meters, can’t berth these supertankers.
Byco’s SPM has already proven its efficiency and reliability. Last year, the company successfully berthed a massive oil tanker at SPM that was carrying a “record 102,000 metric tons of crude,” Ahmad said. That was the largest oil tanker that ever berthed at any port of the country. In mid-2017, Byco said in its annual report that the SPM alone was handling roughly 14% of Pakistan’s total crude oil imports, which makes this not only a key asset for Byco but also for Pakistan’s energy industry.
Moving forward, the SPM will likely play an even bigger role in Byco’s operations and Pakistan’s energy landscape. The country’s crude oil and petroleum products demand will likely climb substantially in the coming years as the economic growth accelerates. Pakistan witnessed 5.3% GDP growth in the last fiscal year but that number is widely expected to climb to 5.5% or higher in the near future, as per estimates from the IMF and the World Bank.
In this backdrop, Byco has planned to gradually ramp up its operations by increasing its refinery’s output, which was near 75,000 barrels per day in March, to the nameplate capacity. To feed its refineries, the company needs to deploy additional SPM facilities, and it plans on doing just that.
Byco is already in the process of installing two more SPMs that can handle crude oil and refined petroleum products. The company has already earmarked the location for the new SPM facilities and is awaiting regulatory approval.
In addition to this, Byco is also actively trying to monetize its SPM. The company is looking for customers, which could be other refineries, who might be interested in using Byco’s port to import crude oil and refined petroleum products. In the long term, the SPM may even become a key source of profits for Byco.
Sarfaraz A. Khan has been a stock market enthusiast since the dot-com bubble and has been writing financial articles since 2011. Khan has done MBA from University of Aberdeen and covers major US-listed basic materials companies, global economy, and Pakistani publicily traded companies. His work has appeared on TheStreet, Yahoo (NASDAQ:AABA) Finance, MSN Money, Seeking Alpha, Dawn, Investing.com, and other websites.