The oil industry in Pakistan went through a rough patch last year in the aftermath of the Coronavirus. However, the oil producers, refiners and marketing companies stood firm during the difficult period and made a comeback. Although the industry is still facing numerous challenges, it came out stronger from the downturn and some companies are now looking for growth and expansion. This includes Cnergyico Pk Limited - Pakistan’s biggest vertically integrated oil refiner and marketer that has ambitious plans for the future.
To gain better insight, SouthAsia availed an opportunity to interview Mr. Mohammad Wasi Khan, Cnergyico’s Chairman of the Board who has been associated with the Cnergyico Group for more than seventeen years. A chemical engineer by profession, Mr. Wasi Khan is an industry veteran with four decades of experience of working in key positions in the large public sector and multinational organizations.
Cnergyico has been the fastest-growing oil company in Pakistan in recent history. What was the vision behind the company’s expansion?
Cnergyico was formed by the father-son duo of late Mr. Parvez Abbasi and Mr. Amir Abbassciy in 1995 with a vision to serve Pakistan by reducing its reliance on imported petrol, diesel, and other refined products. Since then, the company has witnessed phenomenal growth. In fact, the expansion we’ve seen in Pakistan’s oil refining sector over the last two decades can be attributed almost entirely to Cnergyico.
Cnergyico initially started in 2004 as a small refinery that could process 18,000 barrels per day of crude oil. Within 3 years, this capacity was doubled to 36,000 barrels per day. In 2015, Cnergyico installed its second oil refining plant of 120,000 BPD which increased its total capacity to 156,000 barrels per day, the largest in the country. At the same time, we’ve also expanded our nationwide network of petrol pumps that currently stands at around 450 locations. Our petroleum marketing business is also growing rapidly.
We are also the only private-sector energy company in Pakistan that owns and operates its own offshore port. Cnergyico’s state-of-the-art Single Point Mooring (SPM) facility is located in deep-sea near our oil refining complex. Unlike other energy companies that use third-party operated ports for importing crude oil, we use our own SPM. As a result, Cnergyico does not face any port congestion or delays that other refining companies frequently experience.
Besides growing capacity, does Cnergyico has any plan to upgrade and modernize its oil refinery, especially in light of the changing environment of the global energy market?
The global energy market has always been in a state of constant change. The advent of advanced technologies, new regulations, shifts in consumption patterns, and major geopolitical events (such as the ongoing war in Ukraine) are some of the factors that have played a big role in reshaping energy markets and will continue to affect this sector in the future. In the past few years, the changes in the energy markets have been driven by the arrival of electric vehicles, fuel-efficient internal combustion engines, non-fossil fuels, renewables, etc.
The three main industries that constitute the energy sector – upstream (oil and gas exploration and production), midstream (transportation and storage), and downstream (refining and marketing) industries – have upgraded their businesses in light of the above-mentioned trends. In Pakistan, oil refiners have been modernizing their facilities, including Cnergyico which has installed advanced technology equipment and has improved its production profile meaningfully over the years.
The upgradation is a process that continues over time. There’s a constant need to adopt new tools and technologies in light of the changing market dynamics to become more efficient, reduce costs, and improve performance. Currently, Cnergyico is undergoing its biggest upgrade that will transform our hydro-skimming refinery into a deep conversion refinery.
Under the Upgrade-1 project, Cnergyico will install 19 plants to significantly modernize our oil processing capabilities. This will allow us to convert a major bulk of our furnace oil into high-value gasoline and diesel. Our entire production of petrol and diesel will be more environmentally friendly and will comply with the international Euro-V standards. In this upgrade, the crude oil processing capacity will also be expanded up to 200,000 BPD. The Upgrade project provides the flexibility of petrochemical integration.
The Upgrade-1 project will further cement our position as an industry leader that can produce even greater quantities of high-quality, high-performance, and environmentally friendly fuels and petrochemicals in the country. The company will simultaneously expand its retail network to align with added capacities.
What will Cnergyico’s operations and production look like after it completes the Upgrade-1 project? Will this have any positive effect on Pakistan’s economy?
The upgrade-1 project is going to drastically change our production profile. Currently, we are producing large quantities of furnace oil but after installing the FCC (Fluidized Catalytic Cracking), Cnergyico will convert it into high-value gasoline and diesel products. Overall, by adding plants at the oil refining complex, we will be able to deep refine approximately 80% of our output into Euro-V compliant petrol and diesel.
The Upgrade-1 project will increase Cnergyico’s production of petrol and diesel. That’s going to go a long way in reducing Pakistan’s dependence on buying these expensive fuels from abroad. Remember, this is one of the main reasons our country runs into massive current account deficits. But that’s going to come down as Cnergyico raises its petrol and diesel output.
What are some of the biggest challenges the oil companies are facing in terms of growth and how can these issues be addressed?
The oil companies operate in a tightly regulated environment. All key aspects of the business are controlled by the government. Most importantly, refiners and oil marketing companies can sell their products only at prices that are determined by the government.
Additionally, a favourable policy framework that could encourage refiners to upgrade or modernize their plants is much needed. The downstream energy companies play a critical role in the economy, considering all other businesses rely on smooth operations of this sector, and the oil firms also ensure the nation’s energy security.
If the government introduces business-friendly policies and cuts down the unnecessary regulation, as we have seen in many developed and emerging economies, then this will help the sector flourish more and play a much bigger role in the economy. Through growth and expansion, the refiners and OMCs can turn Pakistan into a commodity trading powerhouse, serving the needs of not just Pakistan but exporting fuels to other countries in the region as well.
Businesses must also think beyond growth and profits. What is Cnergyico’s philosophy regarding social work and what kind of CSR activities do you participate in?
It is absolutely true that business is more than just about making money – providing a safe and healthy workplace, taking care of the environment, serving the communities, and participating in social projects are also critical to a business’s survival. Delivering on ESG (Environmental, Social and Governance) factors has become just as important as growing profits when it comes to creating value for the shareholders. These principles have been a core part of Cnergyico since the company’s inception.
Cnergyico has been the pioneer of using the Miyawaki Method of tree plantation in Pakistan among large corporations and we have planted thousands of trees near our refinery in Hub, Balochistan and Karachi using this novel technique. The company has been investing heavily to increase Pakistan’s forest cover as part of its de-carbonization efforts. Cnergyico provides clean drinking water to thousands of people who live near our refinery in Hub through our solar-powered RO plant. The company also sponsors vocational training and skill development programmes for women. Cnergyico also supports the preservation of coral reefs and other marine habitats found in the Arabian Sea.
The full details of our CSR activities are far too many to provide them here. But in short, Cnergyico has one of the most robust CSR programs among all major corporations in Pakistan. Our award-winning activities, which have been widely recognized by local and international bodies, are focused on achieving various goals outlined by the United Nations Development Programme (UNDP) as Sustainable Development Goals (SDGs), specifically Goals number 5 (Gender Equality), 6 (Clean Water and Sanitation), 13 (climate action), and 14 (life below water).
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