PRL is set to double its refining capacity and produce EURO V Standard Fuel. Will it mean anything for smog?

ISLAMABAD: Pakistan Refinery Limited (PRL) is all set to sign a supplemental agreement with the Oil and Gas Regulatory Authority (OGRA) to double its refining capacity and to produce EURO V standard fuel.

As per details, this agreement will pave the way for a transformative upgrade and expansion project that will double PRL’s refining capacity, from 50,000 barrels per day (bpd) to 100,000 bpd. Crucially, the project will also enable PRL to produce EURO V standard fuel, which will save the company billions of rupees annually in penalties for non-compliance with environmental regulations.

Euro V Standard Fuel

The announcement is important particularly when it comes to pollution caused by vehicular emissions in the country, especially in the Punjab.

Air quality in Punjab from 1998 to 2023 has fallen consistently. Over this same 25 year period, the increase in the number of vehicles on the road has been astronomical. According to a government report, while private transport rose by 332%, public transport increased by only 165% and road networks by a mere 6% in the past 25 years.

There are currently nearly 20 lakh registered cars in Punjab and close to 1 crore 57 lakh motorbikes in the province. And while this large number of vehicles is not by any means good and there is a dire need for a good, robust, interconnected system of public transport, the sheer number of vehicles alone is not the problem. A bigger issue is the quality of fuel that these automobiles burn in order to run. The European emission standards are vehicle emission standards for pollution from the use of new land surface vehicles sold in the European Union and European Economic Area member states and the United Kingdom, and ships in EU waters. The standard measures the sulphur content in fuel that is being used which is detrimental to the amount of pollution that these emissions cause. In Pakistan, most fuel being used does not fit the Euro2 standard when the acceptable fuel quality is Euro5.

“We need to get the old clunkers off the road and bring in regulation that ensures all vehicles have things like catalytic converters and do not overly pollute. Fixing the entire infrastructure of a province and bringing in public transport are very long term solutions and we need to include these in our master plans for cities but we can at least get the bigger polluters off the roads,” says Sanval Nasim.

The Environmental Protection Department (EPD) has also gone on record to state that vehicular emissions can be reduced by increasing public transportation, strengthening of vehicular inspection certification system, retiring excessively old vehicles, installation of catalytic converters/diesel particulate filter, and lastly the adoption of latest Euro Standards for vehicular emissions and vehicle manufacturing are required for the betterment of air quality.

How much will they be producing?

The issue, however, is the amount of EuroV Fuel being produced. PRL’s overall capacity is to process just over 47,000 barrels of oil currently per day. Meanwhile Pakistan’s overall consumption is close to 90,000 which would mean even at full capacity PRL would not provide even half the supply of oil. On top of this, the share of EuroV is even smaller.

The current agreements followed the inking of a deal with the regulator, the Oil and Gas Regulatory Authority (OGRA), to access incentives outlined in the new refinery policy. The upcoming signing of the supplemental agreement will significantly enhance the incentives offered in the amended brownfield policy approved in February 2024, highlighting PRL’s proactive approach to regulatory compliance and its determination to capitalize on the incentives outlined in the new refinery policy.

The expansion undertaken by PRL represents an investment aiming at ensuring long-term sustainability, with plans to increase Motor Spirit production by more than six times, High-Speed Diesel by three times, and the eventual elimination of Furnace Oil from its product portfolio. Without these upgrades and expansion, the long-term sustainable operation of the company will remain a question mark.

In the meantime, PRL is ensuring that its existing operations remain sustainable by focusing on operational excellence. Consequently, PRL achieved and surpassed production targets for the second quarter of 2023-24, demonstrating a significant improvement in its production mix and setting new industry standards.

It is pertinent to mention that despite economic challenges and low local demand for furnace oil, PRL’s financial performance remains robust. The company recorded a second-quarter financial close at 2.0 billion after the record profit of 4.5 billion in the first quarter of this year. The six-month profit stands at 6.5 billion, marking the fourth consecutive year of profit for PRL, which includes the highest ever profit of 12.5 billion in 2022.