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PARCO (Pak Arab oil refinery) Ltd Pakistan Author: Surmad | Posted at: 12:03 PM | Filed Under: Asia, Business, Consulting, Industrial Goods and Services, Kot Addu Power Company, Marketing and Advertising, Pakistan, Parco Pakistan,United States |

Operation Management

The term operations management refers to the design, direction and control of the process that converts resources (inputs) into finished goods and services (outputs). Energy organization has an operations system that creates value by transforming inputs into outputs. The transformation process is just as relevant to service organizations as to those in manufacturing. Large companies generally assign each function to a separate department, which assumes responsibility for certain activities.

Pak Arab Refinery (PARCO)

PARCO was established in 1972 as t venture between the governments of Pakistan & Abu Dhabi to own and operate petroleum refineries, cross country crude / product pipelines and POL storage in Pakistan. It has emerged to be the most successful t venture between the two brotherly countries. PARCO is striving through its various energy infrastructure projects to excel country’s expectation in all aspects of product reliability, performance, delivery & service through the process of continuous growth of its system aimed at getting closer to the end consumer and meeting the energy needs in an efficient and economic manner.

Introduction

Parco’s present system can best be described as the country’s energy lifeline. It consist of over 1200 km 16 inches via pipe line with a sophisticated microwave based telecommunication and SCADA system, more than 200,000 MT of petroleum storage, 4 terminals and 7 cross country pumping stations. The PARCO t venture was formed to setup an Oil Refinery at Mahmood Kot. The pipeline commissioned in 1981 is capable of transporting crude oil as well as refined petroleum produces. Until 96 PARCO had transported 35 million tons of High Speed Diesel and Kerosene to meet upcountry needs of the domestic, commercial, industrial, agricultural and defense sectors. The company has been paying handsome dividends to the shareholders from the very first year of its commercial operations. In addition to the payment of handsome dividends to the shareholders, it has made a significant contribution to the national exchequer through taxes, import duties and savings in freight pool. Its pipeline has also helped conserve foreign exchange by saving imported diesel that would other wise be used in transporting oil products to upcountry areas by rail and road and has offered increased employment opportunities in the country. In a nutshell all the initial investment in PARCO has been paid back many times over almost Rs. 32 for every rupee invested in financial and economic . Over the years, PARCO has expanded and extended its operations in a professional manner. The growth has been modular and in anticipation of the country’s needs. In 1991, it implemented with the cooperation of Oil Marketing Companies, the project to Debottlenecking Keamari Facilities, which not only relieved the berthing congestion at Keamari port by directly discharging tankers into PARCO’s Korangi Station but also increased the oil storage capacity in the country by 50,000 tons. This came in extremely handy during the Gulf war by cushioning potential shortages of product, due to no arrival of tankers for over 15 days, and maintained supplies upcountry without any disruption. In 1994 they completed and successfully commissioned two additional intermediary pumping stations, one atBubak in Sindh and the other at Fazilpur in Punjab which increased the pumping capacity by almost 55% from 2.9 to 4.5 million tons per year. PARCO have also acquired the capability through the use to technical innovations and without any capital expenditure, to further increase the capacity of system by another 40% from 4.5 to 6.0% million tons per year to be able to continuously meet the country’s requirements up to 1999. The project to extend their Karachi to Mahmood Kot pipeline system by another 350 Kms via Faisalabadhaving end point at Machhike has completed. This has result in extending their system from 900 km to 1250 km from Karachi. An important design feature of this project is the possibility for the future extension of pipeline from Faisalabad to Kharian via MandiBahauddin and from Kot Bahadur Shah to Sahiwal

viaToba Tek Sing. Once all these projects are in place, it will enable PARCO to cater to the petroleum product needs of the entire consumer market located in the crescent belt from Peshawer to Multan, when constitute almost 60% of the entire country’s needs. Initially the PARCO mid-country refinery project was designed with the capacity of 2 million tons refinery. By undertaking a comprehensive techno-economic feasibility study of a 4.5 million tons refinery instead of the 2 million tons, more than double the capacity originally conceived. Number of national and international financing agencies including the World Bank have fully endorsed the technical and commercial aspects of this feasibility. PARCO mid country refinery, is being set up at the end of the existing pipeline from Karachi to Mahmood Kot where a large product storage facility and other infrastructure already exist and, it will provide additional 4.5 million tons per year equivalent to 100,000 BPD refining capacity in the country. Making its capacity some what more than the capacity of three existing refineries in the country. The mid-country refinery is designed as a fully integrated refinery, having both primary and secondary facilities to maximize the production of value added and deficit products. Selected refinery processing scheme, is based on the state of the art technologies available and shall be able to meet the prevalent international environmental standards since the refinery will be adequately equipped to produce, for the first time in the country, un-leaded gasoline and low sulfur diesel. PARCO refinery will produce almost one million tons of the much needed furnace oil for the WAPDA Power Houses near Kot Addu, thus eliminating the expensive logistic of transporting furnace oil from Karachi. This refinery will eventually become a nucleus for the development of down stream petrochemical units in its vicinity. PARCO has now been in existence for more than 25 years. Its corporate voyage through these years has been full of important milestones. In the past 10 years PARCO has grown in size and strength and can look with confidence to a much brighter future. The following 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 t Venture between the countries of Pakistan, Abu Dhabi and Austria. The share holding in the

t venture is in the proportion: Government of Pakistan (60%) and ABU DHABI Petroleum Investment (ADPI) & OMV of Austria (40%). PARCO was established with the Primary objective of: Ø Oil Refining and allied facilities Ø Oil Pipeline systems, storage and allied facilities The company was established with seed money of Rs. 540 million and has now expanded twenty four (24) times to an equity base of Rs.13, 041 million and an asset base of Rs. 91 billion. The summary of capital structure of PARCO is given under: Authorized Capital Paid-up-Capital GOP *ADPI Reserves Long Term Loan Debt: Equity Ratio

INITIAL (1981) 1,500 540 324 216 1 1,115 67:33

PRESENT (2000) 5,000 2,160 1,296 864 14,340 52,762 77:23

With the continued of Abu Dhabi, PARCO has been able to implement a number of energy related infrastructure Projects which have contributed immensely towards complementing the oil logistics with the overall national development Plans. Corporate Strategy VISION STATEMENT For PARCO to remain among tomorrow's corporate winners, it may not only need to have a clear vision but also a ion 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. MISSION STATEMENT Ø To enhance and establish a professionally sound corporate identity. Ø 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. Ø To embark upon Integrated Investment Program which takes cognizance of the existing bottlenecks and long-term petroleum needs of the Country. Ø To provide a lead to the indigenous Petroleum Industry in finding of solutions to Technical and Managerial problems.

Ø To develop appropriate Human Resources for undertaking of large Energy Projects in the Country Distinctive Competencies For meeting the competitive priorities, Cost, Quality and flexibility, Parco has integrated system of competence for meeting and coping the environmental changes. Cost For the operations, being performed from the last 18 years at the terminal station Mehmood Kot for the transportation of oils low cost is giving them the competitive edge in this business because the cost of transportation of oils through pipelines is low cost of ratio. Because the other means of transportation like railway or oil tankers are very costly and cost of maintenance and depreciation for railway of and oil tankers is in million of rupees. Maintenance of these pipelines is very cheap.

Flexibility There is volume flexibility in of CDR. Also there is flexibility in that different products can be pumped in the same pipeline. Time From the last 18 years, there has been on time delivery of oil of different marketing companies that they transport from Karachi to Mehmood Kot. There has been no shortage, no back orders in these past 18 years. Work Force Parco has well trained and flexible work force that respond to the market need in a timely manner and fashion. Facilities Parco has actively involved in various facets of Oil storage, Transportation and reefing. The refining of the oil and allied facilities strength the organization to minimize lead time.

System And Technology Parco has immense integrated system of wide spread technology in all following categories Ø Product technology Ø Process technology Ø Information technology The product and process technology are based on the JAPNESE technology system which have been completed by the consultant services of two JAPNESE Company Ø J G C Corporation Ø Marubeni Corporation The whole plant is fully computerized. The YOKAGAWA software is used to control the hardware and execution of the whole plant. As for as information technology is concerned, the various application software for istration purpose working in the istration section, which were developed by the Pakistani company ORA-TECH system.

Project Design & Implementation Strategy Business Design Optimally linked expenditure plans to meet up-country market demand. Process Design Generated most economic “least cost“ engineering solution to meet market requirement. I.e. Fit for purpose Design Engineering Design Eliminated all wasteful expense , eg. Gold Painting. Rigorous review of all cost items. Implementation Strategy Supply and construction contracts to establish firm cost and project completion with in 36 month. Financing Arrangements Generation of equity through in house resources without the need for existing share holders to contribute additional funds. Contractors who take immense pride to have been part the team involved in successful completion of the PARCO Project Facts 1.

Location

Qasbah Gujart / Mahmood Kot

2.

Project Cost

US$886 Million

3.

Main supply

JGC and Marubeni Corp. (Japan)

4.

Completion period

36 months

5.

First crude in pipeline

August 03, 2000

6.

First Crude at Refinery Site August 25, 2000

7.

First product Out

September 04, 2000

ACHIEVEMENTS & MILESTONES Commissioning of Karachi-Mahmood Kot crude -cumproduct pipeline system

1981

Additional 50,000 tons of Storage facility at Korangi and direct discharge of ships into PARCO network to ease pressure on Keamari Oil Piers (DKF).

1990

Introduction of flow improving technology to increase pipeline installed capacity of 2.9 to 4.0 million tons/ annum.

1992

Completion of Bubak and Fazilpur Pumping stations, further raising the pumping capacity by 50%.

1994

System UP-gradation/Modernization: Telecom & SCADA, Revamping,

1995

Intelligent Pigging & Pipeline Rehabilitation Completion & Commissioning of 360 kms Pipeline Ext. Project From Mahmood Kot to Sheikupura near Lahore Via Faisalabad

1997

Commissioning of PARCO Mid Country Refinery (MCR) with a 4.5 MT/ p.a capacity

2000-2001

Launching of Marketing Operations of PEARL in partnership with SHV & OMV and incorporation of a t Venture Co. with TOTAL Fina Elf for development of retail outlets.

2000-2001

Under current implementation: White Oil Pipeline Project (WOPP)

2002

Operation Strategy Operation strategy is concerned with setting broad policies and plan for using the production resources of the firm to best the firm’ s long-term and short -tem strategy. Typical operation operational strategy issues are Ø Location Ø Capacity Ø Layout Ø Process Ø Operation decision Ø Quality Based on the firm’s competitive priorities for its products or services, the operations manager must select a flow strategy, which determines how the operations system is organized to handle the volume and variety of product, or services for a specific market segment. A firm may employ more than one flow strategy, for its operations, depending on the competitive priorities of each set of products or services it wants to produce. Flow Strategy As far as PARCO is concerned, it has employed theline flow strategy. The line flow strategy, in which highly automated equipment and employees are organize around the product. Strategies Base on Flow Manufacturing firms with line flows tend to use a make –to- stock strategy, in which the firms hold items in stock for immediate delivery, thereby minimizing customer delivery ties. The strategy is feasible because line flow firms produce high volumes of relatively few standardized products, for which they can make reasonably accurate forecasts.

Operational strategy is fully compatible to the corporate strategy of PARCO. Its long–term objective are inherently embodied in the name of the company.

Location The Refinery is located at Mahmood Kot, which is in the Muzaffargarh District of Pakistan. The city of Multan, only 65 km, from the Refinery is well connected with a national communications network of rail, road and air. The nearest rail link is through Mahmood Kot which is about five kilometers from the Refinery. Within a 30 km radius of the refinery, there are two thermal power complexes at Kot Addu andMuzaffargarh having a capacity of 1,500 and 1,300 MW respectively, while a 762 MW AES Fuel oil based thermal power complex at Lalpir is only 5 kilometers from the Refinery. The River Indus is around 10-15 kilometer on the South Weste of the Refinery, while the River Chenab is 35 kilometers on the North East side of the Refinery. At Mahmood Kot, the petroleum-marketing companies are operating a petroleum product distribution terminal. This terminal, known as t Installation of Marketing companies (JIMCO), is connected by a pipeline with PARCO's Mahmood Kot Terminal. From this terminal HSD produced at the refinery and received from Karachi through PARCO Pipeline is filled in rail wagons and road tankers for transportation to various locations in Punjab and NWFP provinces. Similarly PARCO's Mahmood Kot–Faisalabad–Machike (MFM) Pipeline system originates from PARCO's Mahmood Kot terminal. This Pipeline carries HSD and Kerosene to Machike, (near Sheikhupura).

Dominant Factors About The Location Decision Of Parco Proximity To Parent Company Parco ‘s existing infrastructure at Mahmood KOTTerminal (TS-2) has been optimally integrated into the refinery resulting in cost savings & improved operation. Proximity To Market Parco is located close to power plants (KAPCO, AES Power Plant.) with an annual demand of over 1 Million Tons of furnace oil. OMCs (Oil marketing companies) namely PSO , SHELL & CALTEX are also located near the refinery. Proximity To Resources There is plenty of water at this location to meet the refinery requirement because of the Indus River. Secondly the electric supply availability from Muzaffargarh Power Plant. Favorable Labor Climate As for as labour is concern the location of PARCO is very much suited with the market. The availability of cheap labour of skilled and unskilled is also possible due to center of country.

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Advantages Of Refinery Location Sensible & strategic location from a commercial and national security point of view.

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Serve major consumption center catering to a population of 35 million with a current/ projected significant deficient.

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Streamlines the movement of crude oil and petroleum products thus reducing burden on country’s rail/ road transportation.

¨

Is closer to petrochemical demand center giving an advantage for future growth in to bulk petrochemical.

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Utility supplies have been secured through adjacent power plants and there is plenty of water to meet refinery requirements.

Process Management A process involves the use of an organization resources of provide something of value. While process management is the selection of the inputs, operations, workflows and methods that transform inputs into outputs.

1. 2. 3.

Process Decision Must be made in PARCO when A new or substantially modified, product a with improved quality Demand for a product or service is changing, Current performance is inadequate, One of the first decision a manger makes in deg a well functioning operation is to choose a process that best its, flow strategy. The manager has five process. Ø Project Ø Job Ø Batch Ø Line Ø Continuous Parco is using with Continuous Process among of above five. A continuous process is the extreme end of high-volume, standardized production will rigid line flows. Production Process The refinery is intended to process crude oil of upper Zakhum from Abu Dhabi and light Arabian crudefrom Saudi Arabia. The refinery complex include 11 on side processes units beside numerous offsite/utilities unit and permanent facilities with 46 tanks to store the crude oil, intermediate feeds and finished products.

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Crude unit Vacuum Distillation Unit Naphtha Hydro Treating Process Unit CCR Plat Forming Process Unit Diesel Mix Process Unit Visbreaking unit LPG Merox Processing Unit Carosine Merox Process Unit Gas Concentration Process Unit Amine Treating Unit

The Utilities Comprise of the Following Ø Steam, Feed Water and Condensate Handling System Ø Fuel Oil and Fuel Gas System Ø Water Systems Ø Plant, Instrument Air and Nitrogen System Ø Flare System Steam, Feed Water and Condensate System The Steam System is designed to efficiently meet normal refinery demands. Treating facilities are specified to dematerialize plant water and consistent with the highest-pressure stream to be produced in the Refinery. Condensate recovery for the reuse as boiler feed water is undertaken to the maximum extent practicable. The Condensate system includes flash drums, coolers, tanks and pumps as required. Fuel Oil and Fuel Gas System Process Unit off-gas is collected and routed to one central mixing drum and then distributed to s. Where centralized collection is not feasible, such as for low-pressure vent gas the gas is utilized locally within the process heaters. The Refinery Fuel Oil is circulated through supply and return headers in excess of the actual firing rate and the system has been designed to deliver to all , sufficient Fuel Oil at pressures and viscosities consistent with burner specifications on other needs. The Water System The Water system consists of water treatment, chemical addition, storage and distribution. The raw water is being received from Muzaffargarh canal and stored in the tanks. Cooling water is supplied from an evaporative cooling tower circulation system. The portable water circulation system consists of filtration, chlorination, storage and distribution. Plant, Instrument Air and Nitrogen System The compressors discharge to common air receiver. From this point, instrument air es through dryers before being distributed throughout the plant. Instruments are dried using external electric heaters designed to achieve a water dew point of 20o C. The System is fully equipped with knockout drums and pumps, water seals, seals, flare stack and flare tip, with pilots and remote ignition system. In addition, a flare for H2S containing off-gasses provides an additional tip on the main flare stack. Workshop The Refinery also has a large workshop. The workshop is used for maintenance purpose. It consists of several sections I.e. electrical, mechanical, instrumentation for testing, carrying out maintenance and manufacturing of spares Warehouse The large warehouse is being used to store, receive and issue spares. Officials have been deputed to check maximum, minimum and ordering levels for spare to maintain the required minimum level.

Offsite / Utilities Units Ø Tank age and Blending System. Ø Product Transfer and Loading System. Ø Effluent Collection, Treatment and Disposal System. Ø Electrical System. Ø Plant Buildings. Ø Safety and Fire Fighting. Other Permanent Facilities and Buildings Ø Main Control Building (CR-1) Ø Oil Movement Control Building (CR-2) Ø Blending Control Building (CR-3) Ø Truck Loading Control Building (CR-4) Ø Additive Building Ø TEL Blending Building Ø Electrical Sub-Station (220KV Sub-Station and Sub-Stations No. 1,2,3,4, & 5) Ø Compressors and Pump Houses. Ø Emergency Generator House Ø Internal Road, Pavements and Drainage. Ø Refinery Access Road. Ø Refinery Effluent Disposal Pipeline. Product Sale as of Oct 31st 2001

CRUDE FEED

Arabian Light

60%

Upper Zakhum

40%

PRODUCTS (Metric Tons '000'/ Year) LPG Gasoline HOBC Kerosene Jet Fuel 1 (JP-1) Jet Fuel 4 (JP-4) High Speed Diesel Oil (HSD) Low Speed Diesel Oil (LDO) Furnace Oil Sulphur Total

202 714 543 47 1,382 48 1,613 25 4,574

Capacity Capacity is the maximum rate of output for a facility. The operation manager must provide the capacity to meet the current and future demand otherwise the organization miss opportunities for growth and profit. The facilities regarding capacity has been divided in two categories. Ø Process unit capacity Ø Storage unit Capacity Process Unit Capacities The Refinery capacity is around 4.5 million tons per annum equivalent to a processing throughput of 100,000-barrels/ day of a mixed Arabian Light/ Upper Zakum/ crude slate, which is being transported to the Refinery site by PARCO's Keamari to Mahmood Kot (KMK) pipeline system from Karachi. The Refinery is processing Crude Oil of Upper Zakhum from Abu Dhabi and Light Arabian Crude from Saudi Arabia. The Refinery Complex includes 11 Onsite Process Units besides numerous Offsite/Utilities Units and other permanent facilities with 46 tanks to store Crude Oil, intermediate feeds stocks and finished products. A summary of the available tank age of the Refinery for various Petroleum Products is detailed below:

UNIT

BPD 100,000 42,800

300 284 130 801

CRUDE DISTILLATION VACUUM DISTILLATION NEPTHA HYDROTREATOR CCR PLATFORMER DIESELMAX VISBREAKER KEROSENE MEROX

802 411

LPG MEROX GAS CONSENTRATION

810

AMINE TREATING

820

SULPHER RECOVERY

UNIT CODE 100 110 200

Storage Unit Capacity

25650 16350 22450 15560 20000 4500 Liquid: 22050 Gas: 11242 FG: 7721 SWS: 9963 115 MTPD

The storage capacity of finished product in PARCO are normally maintained in different Container having different capacity which are as follow.

PRODUCT

STORAGE AT MCR

MS (87 RON)

11,000

**MS (90 RON) HSD

5,000 56,000

KEROSENE JP-1 OF LDO

12,000 16,000 34,000 5,000

JP-4 LPG CRUDE

4,000 2,000 350,000

Capacity Planning In Parco In PARCO the plans regarding the capacity are made at two levels. Long–term capacity plans deals with the investment in the new facility and equipment. Short–term capacity plans focus on the work forces, over time budget, inventory and type of decision. PARCO is the capital intensive project. Its long term planning regarding capacity highly depended on installed process unit capacity and demand pattern. In mega and complex project like PARCO there is very less flexibility that installed capacity would increase. Secondly the plant capacity easily serves the customer’s demand with in the installed capacity (100,000 BPD). PARCO is currently operating at 70 % capacity because demand for the product obtained from naphthalene is low in the country. For the surplus oil production Government of PAKISTAN is now going to export these oil products. Measure Of Capacity No single unit capacity measure is applicable to all type of measuring situation’s in PARCO. Major capacity measures in PARCO are. Ø Barrel Per Day Ø Cubic Meter Ø Cubic Feet Ø Tone But capacity in of output measures only in BPD. Because in line flow process output measure is the usual choice for measurement.

The PARCO reach its peak capacity by using marginal method of production such as excessive over time extra shifting and over staffing. The effective capacity rate is to 60 to 65% of plant utilization rate. Capacity Strategies PARCO goes for expansionist strategies for capacity decision. The expansionist strategy, which stays a head of demand minimize the chance of sale loss to in sufficient capacity. The other reason of using expansionist strategy and minimize sale loss is the product recycling. This also minimize the wastage therefore, it is also known as an environment friendly project. Forecasting A forecasting is predication of future events used for planning purpose. PARCO makes its forecast for demand using Time-Series method based on assumption that past pattern demand will continue in future. Naïve forecasting is used for predicting demand diesel. In April-July season demand for Diesel is high so safety stock for this demand is maintained for 1-2 weak. For each year average demand per season is calculated by dividing and demand by the number of seasons per year. Seasonal index is formed by dividing actual demand per season by average demand per season. Then average seasonal induces are calculated which is multiplied by average demand per season to obtain seasonal forecast. Naïve method is used in the sense that forecasting is made for 3 months but review of forecasting is on weekly basis. They make forecast for next week on the basis that how much material was available and how much surplus was there. On the basis of it they make forecast for nest week.

Supply-Chain Management Supply-chain management seeks to synchronize a firm’s functions and those of its supplies to match the flow of material, products and information with customer demand. Material Management One area of operations and logistics playing an major role in supply chain management which is concerned with decision about purchasing materials, inventories, production levels and distribution. At PARCO refinery project, there is a materials management department which deals with these areas. The organization has a computerized maintenance management system (CMMS). About the planning of inventory / equipment they have estimated inventory requirement of parts related to equipment for the period of two months. This for costing is based on historical data on emerge a machine requires this much of equipment inventories. For this purpose codes are being assigned to each item. Purchasing

Purchasing is the eyes and ears of the organization in the supplies market place, continuously seeking better buys and new material from supplies. PARCO imports raw material from Saudi Arabia (Arabian lights) and from Abu Dhabi (Upper Zakhum), 60% of raw material in imported from Saudi Arabia. There is a purchase committee for equipment and supplies purchases. A reorder level of the equipment supplies pipes, bolts etc, used in construction, is maintained and orders is placed of EOQ*. The organization has microwave communication system. Direct with suppliers improves accuracy, shortens response time and inventory. Planning about purchase of raw oil and equipment contracts are being shaped to reach at final agreements. There will be competitive purchasing of oil and there will be centralized buying. Distribution Distribution is the management of flow of materials from manufacturing of consumers and from warehouse to retailers, involving storage from transportation of products. PARCO is currently using pipeline as well as road transportation. Now it is moving only towards pipelines transportation. The organization will go for both forward and backward placement. Forward Placement It means locating stock closer to customers with a retailers or wholesaler. Placement through Machhiketerminal station and through terminal stations of Sahiwal and Kharian.

Backward Placement Backward placement of finished oil products. It will use highway transportation through oil tankers with flexibility of shipping to almost any location and pipeline transportation. Transportation Mode Parco pipelines network km, and was functioning up to Mahmood Kot near Multan, a distance of 864 on the basis of two pumping stations at Karachi and Shikarpur with an annual pumping capacity of 209 million tons. Two additional pumping stations commissioned in 1994 at Bubak (sindh) and at Fazilpur (Punjab) increased pumping capacity to 4.5 million tons per annum. In June 1997, Parco completed its 364km pipeline extension project and extended its operation to Faisalabad and Machike. The project design is allow for future expansion of the pipeline from Faisalabad to Kharainbesides Sahiwal and from Mahmood Kot to Peshawar. It is fast moving to establish a synergy of all these operations in the petroleum downstream sector. AAA and AT ratings by Parco for third

successive year are a proof of the sound financial standings of

Parco. Pumping Stations Parco’s pipeline system consist of seven pumping stations namely: Ø PS-1

Korangi

Ø PS-2

Bubak

Ø PS-3

Shikarpur

Ø Ps-4

Fazilpur

Ø PS-5

Mahmood Kot

Ø PS-6

Kot Bahadur Shah

Ø PS-7

Faisalabad

Terminal Stations There are four terminal station nearly Ø TS –1

Keamari

Ø TS-2

Mahmood Kot

Ø TS-3

Faisalabad

Ø TS-4

Machike

Major Buyers Major buyers of Parco are Name %age of Sale PSO 70% Shell 25% Caltex 05% Parco is now planning to sell 75%

refinery products to existing customers namelyPSO,

Caltex, Shell and remaining 25% to be marketed through Pearl network and total Parco retail outlets. According to the agreement, the refinery will provide the following petroleum products. Ø Motor spirit Ø High speed diesel Ø Kerosene oil

Ø High octane blending component (HOBC) Ø Bleeding components Ø Jet fuel –1 Ø Jet fuel –4 Ø Furnace oil

Inventory Management Inventory is created when receipt of material are finished good exceeds their disbursements. PARCO has to maintain low finished goods inventory because demand of oil products (especially Diesel & Motor Spirit) is very high. And there are only four oil refineries in Pakistan namely Ø Pak-Arab Refinery Limited. Ø Pakistan Refinery Limited. Ø National Refinery Limited. Ø Attack Refinery Limited. These four refineries are fertilizing just 60% of total demand of oil products in Pakistan;importing oil products fulfills still 40% of total demand. PARCO is trying to capturing the 40% share of the market for this reason . PARCO has to maintain two kinds of inventories. Ø Pipeline Inventory Ø Safety Stock Inventory Pipe Line Inventory Materials move from Saudi Arabia and Abu Dhabi to Karachi and then from Karachi to Mahmood Kot. Since transportation of Crude oil from suppliers to Karachi, water mode is used. So there is danger of delaying of ship due to weather condition or some others. PARCO has to maintain pipeline inventory at Karachi terminal station to fulfill the demand during lead time. Safety Stock Inventory When Crude oil has been refined then it is very expensive as well as dangerous to store the oil products (especially High Speed Diesel, Motor spirit, JET fuel 4) so only safety stock inventory for 1-2 weeks is maintained to fulfill the demand. There are 51tanks available to store the fished goods. Maximum capacity of one tank is 6400 liters. Inventory Control System In order to control inventory, following inventory controls systems are being used in PARCO. Ø Periodic Review System Ø Continuous Review System Periodic Review System PARCO has contracts with Saudi Arabia and Abu Dhabi for import of raw material (Crude Oil) on annual basis on the behalf of Government of Pakistan. These contracts are based upon forecasting of annual demand. Then after three months Karachi terminal station checks the raw material inventory level and then place the order. Continuous Review System

At Mahmood Kot terminal station, continuous review system is followed on weekly inventory has been consumed at the end of the day as well as at the end of the week. Total Quality Management Total quality management (TQM) stresses following three principles. Ø Customers satisfaction Ø Employee involvement Ø Continuous improvement It is also includes benchmarking, process design, purchasing and problem solving tools. Customers Satisfaction PARCO offers best quality products with fast delivery time to the customers. These quality products are being offered at international prices. Name of PARCO is a symbol of a quality, which provides satisfaction in of quantity, and quality to its customers. Employee Involvement For employee involvement, PARCO provides developments programs (training), awards (Long service award etc), incentives, bonus, environment. The employee also participates in the decision by giving suggestion for improvement. For continuous improvement, there is quantity lab, available to check the quality of raw material as well as of finished goods. In case of any problem in process different problems solving tools are used to monitor the progress of project. Checklist, histogram, pareto charts etc, are used for improving quality and performance. Conclusion PARCO is an mega project and producing the Every thing PARCO achieves is the product of team effort. All PARCO employees share the achievement of the company and have every reason to feel proud of what has been achieved so far. Its safe, speedy, efficient and environment friendly operations will help the nation in accelerating and sustaining economic growth and development.