ACKNOWLEDGEMENT

As a matter of fact, people tend to forget those who are behind their
achievements and have stood for them whenever they have needed
assistance. A Malayan Proverb is “One can pay back the loan of gold but one
dies forever in debt to those who are kind”. Realizing the fact we express our
gratitude to those who have helped us throughout in this Accounting Project.
In fact it will be rightful to say that without their co-operation this effort may
have ended up in disaster.

Our gratitude will be meaningless if we are not grateful to Allah for His
kindness upon us. His benevolence and blessings have made us capable.

We whole-heartedly thankful to Him.

We are very thankful to our project coordinator, Sir. WAQAS SAEED for
offering us with every help possible. His sincere cooperation has helped us to
complete this project.

We are also very thankful to the institution of which we have been a part. Its
teachers have been very helpful and co-operative. We are very thankful to
them.

11
Industry:

Oil and Gas Refineries in Pakistan

Firms:

Pak-Arab Oil Refinery Ltd.

Attock Oil Refinery Ltd.

Product:
Liquid Petroleum Gas (LPG)

INTRODUCTION OF LIQUIEDIFIED PETROLEUM GAS

11
 Liquefied Petroleum Gas (LPG) is a colorless, odorless and environment
friendly mixture of hydrocarbons (mainly propane and butane) which is
gaseous at normal temperature and pressure, and liquefiable under reduced
temperature or moderate pressure. A chemical ethyl mercaptan is added to
impart a pungent odour for leak detection. Currently about 1600 tons/day
LPG is being produced domestically contributing 0.4 % to the total energy
supply mix. Because of its characteristics LPG is fast becoming a fuel of
choice in the areas, where natural gas distribution network is not available.
Currently out of 25 million households in Pakistan, 4.3 million are connected
to natural gas network and the rest are relying on LPG and conventional fuels
like coal, firewood, kerosene, dung cake etc.

In June 2000, the Federal Government decided to deregulate the LPG

industry with a view to making it investor friendly, foster healthy
competition, improve safety standards, and ensure better consumer
services. Accordingly, in supersession of LPG (Production & Distribution)
Rules 1971, LPG (Production & Distribution) Rules 2001 were formulated
under which LPG allocations made by the Ministry of Petroleum & Natural
Resources (MPNR) prior to deregulation were given protection to the extent
of terms of existing agreements between the marketing companies and
producers. These Rules also empower the producers and marketing
companies to fix a reasonable producer price for their product and a retail
price respectively. After promulgation of Oil & Gas Regulatory Authority
(OGRA) Ordinance, 2002 all LPG regulatory functions as envisaged in LPG
(P&D) Rules, 2001 were transferred to OGRA in March 2003.

This policy aims at increasing LPG supplies, streamlining its distribution

at affordable prices, especially to LPG starved areas of the country and
promoting healthy competition for growth of LPG market while ensuring
minimum safety standards across the LPG supply chain. To achieve this goal,
issues regarding LPG production, LPG licensing, safety standards, pricing,
distribution in under developed areas and import of LPG have been
addressed in this document.
11
 PakistanEnergyMix 2006
1%
5%
9%
43%

33%
9%

Nuclear Hydel Coal Natural Gas LPG Oil

11
 Composition of Liquefied Petroleum Gas (LPG)

Liquefied Petroleum Gas (LPG)

# Test Description Units Test Method PSI Specs Max/Min

1 Composition - D-2163 Predominately -

mixtures of
butanes and/
or butylenes
with propane
and/or
propylene

2 Vapor pressure at KPa D-1267 1103 (160) Max

37.8 °C (lbs/inch2)

3 Temperature 95 % °C D-1837 4.4 Max

evaporation

4 Pentane and heavier VOL% D-2163 2 Max

liquid

5 Corrosion copper - D-1838 1 Max

strip

6 Volatile Sulphur mg/m3 D-2784 343 Max

gains/ft3 (15)

7 Free water contents % D-1837 None Max

8 Mercaptan Sulphur mg/m3 IP-104 92(4) Max

gains/100ft
3
11
 Benefit Analysis

Liquidified Petroleum Gas is a type of fuel which is compressed to

liquid form and it is easily transferable at any place in cylinders. It is used for
various purposes such as in houses, in firms and also in vehicles now days.

Ease of use

Accessible
Customer Appeal
Safe and sound

Used for various purposes

Features In liquid from (Highly Compressed)

Easily transferable
Advantages
Accessible everywhere

Benefits Provides Energy

11
 Strategic Group

No. Company Name Capacity

1 Khalifa Refinery (PARCO-II under 300,000 bbl/d (48,000 m³/d)
Construction),
2 Mid Country Refinery (PARCO) 100,000 bbl/d (16,000 m³/d)
3 Karachi Refinery (Bosicor Pakistan 120,000 bbl/d (19,000 m³/d)
Limited)
4 Pakistan Refinery Limited (PRL) 50,000 bbl/d (7,900 m³/d)
5 National Refinery Limited (NRL) 60,000 bpd
6 Attock Refinery Limited (ARL) 46,000 bbl/d (7,300 m³/d)
7 Indus Oil Refinery Limited (IRL) 90,000 bpd
8 Enar Petroleum Refining Facility (EPRF) 3,000 bbl/d (480 m³/d

Company Address Phone Fax Email Websit

Name Numbe Numbe Address e
r r

Pak-Arab Pak-Arab +92-21 +92-21 info@parco.c www.parc

Refinery Refinery 5090100- 5090127 om.pk o.com.pk/
Limited Limited 25 5090165
Corporate
PARCO Headquarters +92-51
Mid country Korangi Creek 2250746
Refinery Road
P.O. Box 12243
Karachi-75190
11
 Pakistan

Pak-Arab
Refinery Ltd
House No. 2,
Street No. 3
Sector F-8/3
Islamabad
Khalifa Refinery Under
PARCO-II Construction
Attock Attock Refinery +92-51 +92-51 info@arl.com. www.arl.c
Refinery Limited 5487041- 5487254 pk om.pk/
Limited Morgah, 45 5486404
Rawalpindi, arl@comsats.
Pakistan. net.pk
Karachi Under
Refinery Privatization
Bosicor
Pakistan Ltd.
Pakistan Pakistan +92-21 +92-21 info@prl.com. www.prl.c
Refinery Refinery Ltd. 509-1771- 5091780 pk om.pk/
Limited P.O.Box 4612, 79 5060145
Karachi - 509-1811- 5092635
74000 16
512-2131-
40

National 7-B, Korangi +92-21 +92-21 info@nrlpak. www.nrlp

Refinery Industrial Area 5064135- 5054663 com. ak.com
Limited Korangi, 7 5066705
Karachi, 5064377-
Pakistan. 79
5064981-
86
5064988

Indus 85 C, Block 2, +92-21 +9221 info@irl.com. www.irl.

Refinery Clifton, 536 4911- 583 6754 pk com.pk
Ltd. Karachi 75600, 17
Pakistan. 587 6804- administration
06 @irl.com.pk
11
 Pak-Arab Oil Refinery Limited (PARCO)
PARCO means energy

PARCO is a fully integrated energy company and considered to be the leading

player in the industry. It is one of the largest companies of the Pakistani corporate
sector with an asset base approaching Rs. 100 billion. As a joint venture between
11
the Governments of Pakistan and Abu Dhabi, it is seen as a role model of Pak-Arab
business co-operation and an 'enlightened investment decision'. PARCO is poised to
further consolidate its growth and strategic supplier role for the country. That's why
PARCO MEANS corporate ENERGY.

For many years after the completion of the pipeline, the dream was to
actualize the planning for a Mid-Country Refinery at Mahmood Kot, near Multan. In
September 2000, the dream became reality with the start-up of the country's largest
capacity refinery of 100,000 barrels per day, costing US$ 886 million - commissioned
well within budget and a month ahead of schedule. The state-of-the-art refinery is
based on the latest equipment and process technology and also serves as a training
resource for technologists from the region. To us, PARCO MEANS modern and
efficient ENERGY.

The refined petroleum products transport logistics is based on road and rail
and the existing pipeline network. The surface transport mode is potentially
hazardous to other traffic, human lives and the environment besides wear and tear
of road surfaces. PARCO's pipeline network is a safer and more cost effective
alternative for both crude and product transportation. With the completion of the
White Oil Pipeline scheduled in October 2004, a more comprehensive, safer, cost
effective, demand responsive and eco-friendly pipeline network will be available to
meet the country's growing needs for energy. Therefore, PARCO MEANS cost
effective and eco-friendly ENERGY.

PEARL - The better quality brand

PEARL as a brand name symbolizes purity, value and quality assurance.

Orderly marketing has been initiated with the promotion of lubricants and LPG under
the PEARL brand individualized with a special logotype and graphic symbol.
Distribution for the lubricants is being developed nationally through dealer outlets
while PEARL Gas is being co-marketed to industrial users and households in the less
accessible and remote areas with SHV of Holland, who have been allocated 25% of
the total LPG production of the refinery.

PARCO'S EVENTFUL CORPORATE VOYAGE

11
 PARCO has now been in existence for more than 30 years. Its corporate
voyage through these years has been full of important milestones. In the past 17
years PARCO has grown in size and strength and can look with confidence to a
much brighter future. The following account gives a true insight into PARCO's story
of success, its trail of achievements and its up-coming aspirations.

CORPORATE PROFILE

Incorporated as a public limited company in 1974, PAK ARAB REFINERY LTD is

a Joint Venture between the countries of Pakistan and Abu Dhabi. The share holding
in the Company is in the proportion of Government of Pakistan (60%) and ABU
DHABI Petroleum Investment (ADPI).(40%)

PARCO's major activities are:

• Oil Refining and allied facilities

• Oil Pipeline systems, storage and allied facilities
• Marketing

The company was established with a seed money of Rs. 540 million and in the
last 30 years has expanded a phenomenal 42 times and achieved an equity base
of over Rs.23 billion and an asset base exceeding Rs.89 billion or just over US$ 1.5
billion in current dollar terms. The summary of the capital structure of PARCO is
given under:

(Rs. in million)

INITIAL (1981) PRESENT (2003-04)

Authorized 1,500 15,000
Capital
Paid-up-Capital 540 11,605
GOP 60% 324 6,963
ADPI 40% 216 4,642
Reserves 1 11,296
Long Term1,115 28,179
Loan
Debt: Equity69:31 61:39
Ratio
11
 Vision And Mission Statement

VISION:

For PARCO to remain among tomorrow's corporate winners, it may not only need to
have a clear vision but also a passion for translating that vision into reality. The big
challenge is therefore, not only trying to figure out what future will be the right one,
but to choose a future that will give definite competitive advantage to the Company
over the long-term. Therefore, creating a cause for action besides charting a course
on how to get there.

MISSION STATEMENT:

• To enhance and establish a professionally sound corporate identity.

• To operate the existing Pipeline System, Mid Country Refinery and marketing
initiatives in a manner that establishes it as a centre of excellence in Pipeline,
Refining & Marketing Activities in the Country.

• To embark upon Integrated Investment Programme which takes

cognizance of the existing bottlenecks and long-term petroleum needs of the
Country.

• To provide a lead to the indigenous Petroleum Industry in finding of solutions

to Technical and Managerial problems.

• To develop appropriate Human Resources for undertaking of large Energy

Projects in the Country.
11
ORGANIZATIONAL CHART (PARCO)

FINANCIAL OVERVIEW
11
Socio Economic Contribution:

PARCO has generated significant benefits for the national economy against
GOP's initial investment of Rs. 324 million. Upto June 2004 it has paid the
following amounts to Government Exchequer:

Custom Excise Duties/Taxes Rs. 3,871 million

Income Tax Rs. 7,358 million
Dividend Rs. 6,615 million
Total Rs. 17,877 million

Returns to Shareholders:

Dividend

PARCO has paid US$ 272 million upto June 2004, against an equity of US$ 54
million (GOP US$ 33 million Abu Dhabi US$ 21 million)

Entire Development through Self-Financing

Expanded Shareholders' Equity from Rs. 540 million to Rs.23 billion (by over
42 times)

Equity financing of vital energy sector projects completed or under

implementation:

Upgradation of Karachi to
Mahmood Kot $ 25 million
Pipeline System
11
MFM Pipeline Extension $ 130 million
Mid-Country Refinery $ 886 million
White Oil Pipeline Project $ 480 million

PARCO RATINGS MAINTAINED

The long-term and short-term entity ratings of PARCO have for the
Tenth consecutive year been maintained by the Pakistan Credit Rating
Agency (PACRA) at "AAA" (Triple A) and "A 1 +" (Single A One Plus).

A PACRA announcement said the entity ratings were applicable to the

senior unsecured creditors of the Company. The rating of the secured TFCs
of Rs. 2.5 billion has been maintained at "AAA" (Triple A). The ratings denote
the lowest expectation of credit risk and an exceptionally strong capacity for
timely payment of financial commitments.

PARCO - a joint venture between the Pakistan government having 60 percent

holding and the Emirates of Abu Dhabi with 40 percent stake is involved in refining,
transporting and marketing of various petroleum products in the country in an
integrated manner. PARCO's ratings reflect stable business operations, effective
management policies, competitive margins on pipeline operations and the
guaranteed 25 percent minimum return on the paid up capital attributable to its
investment in the Mid-Country Refinery, a project implemented under the 1994
petroleum policy.

According to the PACRA announcement, "As a result, the company's business

and financial risk continues to be very low. Nevertheless, the liquidity levels are
expected to remain aligned to the pace of disbursements of SGR (Shortfall in the
Guaranteed Return) by the Pakistan government.

PRODUCTS AND PRICES (End Consumer)

OCAC Link for Regulated Product Prices: http://www.ocac.org.pk/price.html

(Prices Inclusive of Sales Tax @ 15%)

11
 Effective
Products Price (Rs/Ton)
Date
Ex-Refinery Consumer
Furnace Oil 35,627.00 35,795.00 01.01.08
LPG 45,878.10* - 03.12.07
Sulphur 12,157.80 - 11.07.07
Imported Effective
Grade Viscosity Price (Rs/Can)
Lubricants Date
Start F (1 Ltr) SF/CC 15W-40 160.00 15.08.07
Start F (4 Ltr) SF/CC 15W-40 560.00 15.08.07
CD-4/CF-
Truck M Plus (4 Ltr) 15W-40 785.00 15.08.07
4/SG
CD-4/CF-
Truck M Plus (20 Ltr) 15W-40 4,600.00 15.08.07
4/SG
CD-4/CF-
Truck M Plus (Drum) 15W-40 42,500.00 15.08.07
4/SG
Bixxol Economic
SL/CF 15W-40 330.00 15.08.07
(1 Ltr)
Bixxol Economic (4
Ltr)
SL/CF 15W-40 1,150.00 15.08.07

Local Effective
Price (Rs)
Lubricants Date
Pearl Gearup (1.0
GL-4 SAE-140 165.00 17.12.07
Ltr)
Pearl Gearup (205
GL-4 SAE-140 30,750.00 17.12.07
Ltr)
Pearl Speed (0.7 Ltr) SF SAE-40 140.00 17.12.07
Pearl Speed (1 Ltr) SF SAE-40 180.00 17.12.07
Pearl Energy (1 Ltr) SF/CD SAE 20W-50 195.00 17.12.07
Pearl Energy (3 Ltr) SF/CD SAE 20W-50 555.00 17.12.07
Pearl Energy (4 Ltr) SF/CD SAE 20W-50 725.00 17.12.07
Pearl Energy (Drum) SF/CD SAE 20W-50 33,475.00 17.12.07
Pearl Zabardast (4
CC/SC SAE-50 610.00 17.12.07
Ltr)
Pearl Zabardast (10
CC/SC SAE-50 1,500.00 17.12.07
Ltr)
Pearl Zabardast (20 CC/SC SAE-50 2,900.00 17.12.07
11
 Ltr)
Pearl Zabardast
CC/SC SAE-50 27,000.00 17.12.07
(Drum)
Zabardast Plus (4
CD/SF SAE 20W-50 700.00 17.12.07
Ltr)
Zabardast Plus (10
CD/SF SAE 20W-50 1,720.00 17.12.07
Ltr)
Zabardast Plus (20
CD/SF SAE 20W-50 3,400.00 17.12.07
Ltr)
Zabardast Plus
CD/SF SAE 20W-50 33,825.00 17.12.07
(Drum)
Hydraulic Oil (20 Ltr) ISO VG 68 2,400 17.12.07
Hydraulic Oil (Drum) ISO VG 68 24,000 17.12.07
Hydraulic Plus (20
ISO VG 68 3,070 17.12.07
Ltr)
Hydraulic Plus
ISO VG 68 30,700 17.12.07
(Drum)

* This price is exclusive of excise duty @ Rs 85/Ton.

SALES OF PARCO
Year Total Sales LPG Sales
2000-01 2,631,714 5010.6
2001-02 3,485,970 66233.4
2002-03 3,171,438 60257.3
2003-04 3,836,045 72884.9
2004-05 3,756,107 71366.0

SWOT Analysis of PARCO

Strength of PARCO:
There are four main strengths of PARCO.
11
 • PARCO is a fully integrated energy company and considered to be the leading
player in the industry. It is one of the largest companies of the Pakistani
corporate sector with an asset base approaching Rs. 100 billion. As a joint
venture between the Governments of Pakistan and Abu Dhabi, it is seen as a
role model of Pak-Arab business co-operation and an 'enlightened investment
decision'. PARCO is poised to further consolidate its growth and strategic
supplier role for the country. That's why PARCO MEANS corporate
ENERGY.

• The refined petroleum products transport logistics is based on road and rail
and the existing pipeline network. The surface transport mode is potentially
hazardous to other traffic, human lives and the environment besides wear
and tear of road surfaces. PARCO’s pipeline network is a safer and more cost
effective alternative for both crude and product transportation. With the
completion of the White Oil Pipeline scheduled in October 2004, a more
comprehensive, safer, cost effective, demand responsive and eco-friendly
pipeline network will be available to meet the country's growing needs for
energy. Therefore, PARCO MEANS cost effective and eco-friendly
ENERGY.

• PEARL as a brand name symbolizes purity, value and quality assurance.

Orderly marketing has been initiated with the promotion of lubricants and
LPG under the PEARL brand individualized with a special logotype and graphic
symbol. Distribution for the lubricants is being developed nationally through
dealer outlets while PEARL Gas is being co-marketed to industrial users and
households in the less accessible and remote areas with SHV of Holland, who
have been allocated 25% of the total LPG production of the refinery. PARCO
MEANS convenient ENERGY.

• As a model joint venture, PARCO is a firm believer in partnerships. TOTAL

headquartered in France, SHV Energy of Holland and OMV of Austria
represents some of the key strategic alliances that allow co-marketing of fuel
like motor gasoline, diesel, LPG and lubricants. On the ground a network of
nearly 100 gasoline stations under the marquee of TOTAL PARCO will be in
operation by the end of 2004. 25% of PARCO's LPG production is marketed
as PEARL Gas by SHV, while PARCO is marketing PEARL Lubes made by OMV
Austria along with locally blended Lubricants as well. PARCO can truly be
considered as a national asset with an international image. PARCO MEANS
partnerships in ENERGY.

Threats for PARCO:

• There may be substitute of LPG in future, so their business may be at risk

11
 • CNG is spreading throughout Pakistan, so there may lost LPG business

• Pakistan may give new projects to foreign companies which are better
than PARCO

Opportunities for PARCO:

There are some opportunities for PARCO which are given below.

• President of the World LP Gas Association, James Rockall, who had come in
Pakistan for a conference, in his address, touched upon various issues related
to the global scenario of LPG, and its potential and challenges in the Pakistani
market. He explained the worldwide growth trends and said that developing
economies especially those in Asia, present huge opportunities for the use of
LPG as it contribute to the socioeconomic development through its advantage
of portability. So, it is an Opportunity for PARCO to serve its resources
for socioeconomic development.

• To grow the value to shareholders by delivering healthy profitability and

leveraging our competitive edge, transition from Bur Shane to PARCO Gas
was started in Pakistan in line with the PARCO Global strategy of extending
the PARCO brand equity and with the business expansion Opportunities
arising as a result of the Governments decision to deregulate the LPG
industry. PARCO’s LPG business in the country.

Threats for Parco:

There are some certain threats for PARCO which are given below:

• The challenge is the demand for multi-dimensional scaling capabilities of a

system; led by an increasing number of new threats, vulnerabilities and their
11
 timely solutions. Existing theologies have focused on a single dimension: For
example, network security technology has focused on packet security, while
server security technology has focused on computational security. The result
has been an increasing gap between the demands from management for
information and the capabilities of the existing platforms to satisfy them. In
essence, the existing “focused” platforms have become a bottleneck in high-
risk environments. These bottlenecks will only increase, in time, unless a new
approach is taken which is capable of satisfying the needs and demands of
Information Security.

• At that time Attacks on Pipeline Network for PARCO is one of the major threat
now days in Pakistan.

• Another threat for PARCO is in shape of facing another competitor. Because,

some Italian companies could also extend their services towards meeting the
challenges and opportunities in the LPG auto fuel in Pakistan.

11
 CRITICAL SUCCESS FOCTORS

Pak-Arab Oil Refinery Limited (PARCO)

• Strength is people PARCO MEANS people ENERGY

• Strategic assets PARCO MEANS strategic and sensible ENERGY

• Transfer of technology PARCO MEANS harnessed ENERGY

• Great expectations PARCO also MEANS easily available ENERGY

• Beautiful world PARCO MEANS good, clean & healthy ENERGY

• New wave of energy PARCO MEANS new Energy

• International Partnerships PARCO MEANS partnerships in ENERGY

• White oil pipeline PARCO means Refined Energy

Segmentation

Basis of Segmentation:

PARCO is a big producer of LPG and it has substantial market share in

Pkistan. So it has segmentized its whole market on the following basis,

• Sector of Usage
11
 • Firmographic Basis

Target Segments:

• General Industry

• Fertilizer

• Commercial

• Domestic

• Transport

Promotion:

• Ease of availability

• Authorized manufacturer and ORGA Certified, So good standard

• Extensive Supply Chain and storage tanks

• Easily moveable

• Safety Standards according to OGRA

• Certified LPG refilling station at various spots

Distribution:
PARCO is currently distributing LPG in markets in three cylinder sizes i.e. 6Kg,
11.8Kg, and 45.4Kg to meet domestic and commercial customer requirements. It
has an extensive distribution channels and filling stations in major cities of Pakistan.
From where LPG is transported in specialized and safe containers.

Future Plan of PARCO

PARCO recognizes its growing role and responsibility as a Pipeline transporter,
Refiner and Marketer in the vitally important energy sector of the country and
encourages and expects its employees to strive for excellence in all their endeavors
by focusing on the following four productivity related areas.

• Continuing drive to instill the sense of responsibility and accountability

at all levels of authority and ensure complete transparency in all
transactions.
11
 • Stress on performance improvement through training and application of
latest technology.

• Rational sharing of work between own and contractor employees/

facilities.

• Emphasis on growth and expansion together with efficient management

of current operations to ensure consistently improving returns to the
Shareholders.

Everything PARCO achieves is the product of team effort; as Working in close

partnership with our staff has helped us to successfully manage and avert
many a serious crises. We strongly believe that managing the process of growth
is greatly facilitated when the concepts and tools of organizational change are well
understood throughout the organization.

PARCO's financial position is strong and it is determined to continue to meet high

standards, as may be depicted by the triple AAA and A+ credit rating, which has
been awarded by PACRA, for a seventh consecutive year.

PARCO's Future Plan

11
 Attock Refinery Limited (ARL)
Attock Refinery Limited (ARL) was incorporated as a Private Limited Company
in November, 1978 to take over the business of the Attock Oil Company Limited
(AOC) relating to refining of crude oil and supplying of refined petroleum products.
It was subsequently converted into a Public Limited Company in June, 1979 and is
listed on the three Stock Exchanges of the country. The Company is also registered
with Central Depository Company of Pakistan Limited (CDC).

Original paid-up capital of the Company was Rs 80 million which was

subscribed by the holding company i.e. AOC, Government of Pakistan, investment
11
companies and general public. The present paid-up capital of the Company is Rs
454.896 million. ARL is the pioneer of crude oil refining in the country with its
operations dating back to 1922. Backed by a rich experience of more than 80 years
of successful operations, ARL’s plants have been gradually upgraded/replaced with
state-of-the-art hardware to remain competitive and meet new challenges and
requirements.

It all began in February 1922, when two small stills of 2,500 barrel per day
(bpd) came on stream at Morgah following the first discovery of oil at Khaur where
drilling started on January 22, 1915 and at very shallow depth of 223 feet 5,000
barrels of oil flowed. After discovery of oil in Dhulian in 1937, the Refinery was
expanded in late thirties and early forties. A 5,500 bpd Lummus Two-Stage-
Distillation Unit, a Dubbs Thermal Cracker, Lubricating Oil Refinery and Wax
Purification facility and the Edeleanu Solvent Extraction unit for smoke-point
correction of Kerosene were added.

Series of Firsts:

• First refinery of the region (1922)

• First to start dispensing major products through pipeline using computerized metering system
(1987)
• First to produce low sulfur furnace (less than 1%) (1998)
• First to produce low sulfur diesel (less than 0.5%) (1998)
• First to achieve ISO 9002 certification for quality control laboratory (1999)
• First to produce low lead premium gasoline direct from refinery process (1999)
• First to produce polymer modified asphalt (2001)
• First refinery/first petro-chemical plant / first major industry to get ISO 9001:2000 certificate
(2001)
• First refinery / first petrochemical plant/first major industry to get ISO 14001 certificate (2002)
• First major industry to get OHSAS 18001 certification (2006).

There were subsequent discoveries of oil at Meyal and Toot (1968). Reservoir
studies during the period 1970-78 further indicated high potential for crude oil
production of around 20,000 bpd. In 1981, the capacity of Refinery was increased
by the addition of two distillation units of 20,000 and 5,000 bpd capacity,
respectively. Due to their vintage, the old units for lube/wax production, as well as
Edeleanu, were closed down in 1986. In 1999, ARL commenced JP-1 pipeline
dispatches, and in 2000, a Captive Power Plant with installed capacity of 7.5
Megawatt was commissioned. Another expansion and upgradation project was
completed in 1999 with the installation of a Heavy Crude Unit of 10,000 bpd and a
Catalytic Reformer of 5,000 bpd. ARL’s current nameplate capacity stands at 40,000
bpd and it possesses the capability to process lightest to heaviest (10-65 API)
crudes.
11
Vision And Mission

Vision 2020

To be a world class and leading organization continuously providing high quality and
environment friendly energy resources.

Mission 2010:

To be a model diversified energy resources and petrochemical organization

exceeding expectations of all stakeholders. We will achieve this by utilizing best
blend of state-of-the-art technologies, high performing people, excellent business
processes and synergetic organizational culture.

ORGANIZATIONAL CHART
11
 Financial Overview of ARL

ARL remains exposed to the cyclical nature of the refining business and any
unfavorable fluctuations in oil or oil product prices adversely impacts profitability.
This was evident in FY06, when refining margins declined due to unfavorable
11
spreads in international crude oil and oil product prices. Consequently, ARL’s overall
performance, measured by ROE, decreased substantially. The pressure on margins
continued in 1HFY07, as the oil-refining industry witnessed a sharp decline in
margins and profitability owing to substantial drop in international crude prices. The
capacity utilization of refinery also decreased mainly due to lower demand of motor
gasoline (owing to availability of cheaper alternative fuels) and temporary
suspension of HSD sales (over supply in the market). However, the company’s
strategic investments in associated companies brought substantial dividend income
and its higher average cash balances generated higher interest based returns for
the company, augmented by more efficient management of the treasury function.
Meanwhile, lately the declining trend in margins has been arrested as indicated by
the most recent results.

30 June 06 30 June 05
Total Asset 29096.4 18367.8
Equity 4953.0 4696.3
Net Income 303.7 1222.6
Gross Margin % 1.0 6.1
ROA % 1.3 8.0
ROE % 6.3 29.8
EBIDTA 970.2 2469.7
Total Debt/Equity % 91.8 0.6

ARL’s Rating Maintained

The ratings reflect ARL’s very strong financial profile emanating from a debt free
capital structure, strong cash flows, and robust liquidity. Although, recently, the
company’s core performance remained stressed mainly due to the nature of its
refining operations, the strengthening of the equity base due to high retention of
profits continues to provide significant cushion against any unforeseen
contingencies. Additionally, ARL’s strategic investments in associated companies
and synergic benefits flowing from the company’s association with the only fully
integrated oil group in the petroleum sector are also key rating factors.

Equity New Previous

Long Term AA- AA-
Short Term A1+ A1+

PRODUCTS AND SERVICES

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 ATTOCK OIL REFINERY SALES
In Millions*

Year Total Sales LPG Sales

1998 6599.00 178.17
1999 7271.10 196.32
2000 14905.10 402.5
2001 16908.80 456.54
2002 20684.60 558.5
2003 13381.00 361.29
2004 25412.73 686.14
2005 41606.19 1123.34
2006 55828.14 1507.35
2007 59108.53 1595.9

Critical Success Factors (CSF)

Attock Oil Refinery Limited (ARL)

• Corporate social responsibility

• Integrity and ethics
• Quality maintenance
• Relationship with suppliers and regulators
• Reduced cost
• T & D and R & D program

SWOT Analysis

Strengths:
• Very old and good image, operating since 1922
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 • Various achievements, awards and certificates. I. e ISO-9002, ISO-9001:2000

• Social License to Operate and Grow

• A1+ Bond Rating

Weaknesses:
Attock oil refinery has not so much extensive and strong marketing system

They

Opportunities:
• With the Pakistani economy poised for a turnaround and an agri-based economy that
relies heavily on making gains and inroads into the market promises significant and
sustainable growth, especially in the agricultural / rural markets. CVPs are being
developed to promote not only agriculture sales but also to have lubricants tied in
with them.

• The optimization of cross – business resources is the need of the day and it is an
approach that will give enhanced value for money. Such cross-functional linkage is
also being evaluated to leverage LPG distribution network for utilizing Retail and
Commercial arrangements.

• Pakistan is a country, which is undergoing paradigm shifts in terms of opportunities

arising from the liberalization and deregulation policies of the government. The
country is exhibiting non-OP opportunities such as gas utilities' privatization, the
prospect of gas import pipelines, and privatization of organizations in the upstream
sector. In light of these trends, ARL Pakistan is currently involved in the development
of the South Asia Gas demand and supply database under the auspices of ARL Gas &
Power. This database will help in assessing the opportunities throughout the South
Asian region.

Threats:

• There may be substitute of LPG in future, so their business may be at risk

• CNG is spreading throughout Pakistan, so there may lost LPG business

• Pakistan may give new projects to foreign companies which are better
than ARL
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 Segmentation
Basis of Segmentation:

Attock oil refinery has segmented the Pakistan LPG market on:

• Geographical basis
• Firmo graphic basis

Target Market:

It has targeted the following areas;

• Specific areas where no natural gas is accessible

• Areas with no CNG facilities
• Specific Industrial Areas
• Under development areas

Promotion:

• Assured availability
• Free maintenance of equipment
• Correct weight
• Safe cylinders
• One stop shop convenience
• Home delivery and safety awareness programme

Distribution:

The Company has increased its distribution channels to cover the

target market segment of LPG. As the found so much success in this
segment but by increasing the distribution channels and offering them
substantial benefits, the company can earn the values and increase its
current sales level.

Future Plan of ARL

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 Company's strategic plans include enhancement of its refining capacity and
production of better, more environment-friendly petroleum products to maintain
and expand its market. The plans include installation of a Pre-flash Unit, an
Isomerization Complex and a Diesel Hydrodesulphurization unit in first phase.
Further, the Company is actively engaged in diversification of its operations within
the energy sector which includes the white oil pipeline project and a power project.
Projects targeting environmental and social improvement for community
development are also being planned.

PROJECTS:
Attock Oil Refinery in which the Company holds 30% equity, has achieved
Financial Close on September 25, 2007. In this respect, financing agreements were
signed on 4th September 2007 with the consortium of banks led by Faisal Bank
Limited and Allied Bank Limited. Down payments have been made on October 12,
2007 to the equipment supplier and construction contractor and the Import Letter of
Credit (L/C) has also been opened in favour of the equipment supplier. It is expected
that the power plant will start commercial operations in the second quarter of
financial year 2009-10.
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Instructions to Bidders (ITB) for preparation of Front End Engineering Design
(FEED) for offsite and ITB document for Engineering, Procurement, Construction and
Commissioning (EPCC) of Isomerization and Diesel Hydrodesulphurization Unit has
been issued and the bids are expected by end October, 2009. The final FEED
packages are expected by February, 2010. The Board of Directors would like to
express their gratitude for the support received from its valued customers, suppliers
and Ministry of Petroleum & Natural Resources.

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