PARCO (Pak Arab oil refinery) Ltd Pakistan

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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 joint 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 joint 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 joint 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 terms.
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 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, Abu Dhabi and Austria. The share holding in the
 Joint 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:
INITIAL (1981) PRESENT (2000)
Authorized Capital 1,500 5,000
Paid-up-Capital 540 2,160
GOP 324 1,296
*ADPI 216 864
Reserves 1 14,340
Long Term Loan 1,115 52,762
Debt: Equity Ratio 67:33 77:23

With the continued support 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 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.
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 terms of CDR. Also there is flexibility in terms 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
administration purpose working in the administration 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 -cum-
1981
product pipeline system
Additional 50,000 tons of Storage facility at Korangi and
direct discharge of ships into PARCO network to ease 1990
pressure on Keamari Oil Piers (DKF).
Introduction of flow improving technology to increase
1992
pipeline installed capacity of 2.9 to 4.0 million tons/ annum.
Completion of Bubak and Fazilpur Pumping stations, further
1994
raising the pumping capacity by 50%.
System UP-gradation/Modernization:
1995
Telecom & SCADA, Revamping,
 Intelligent Pigging & Pipeline Rehabilitation
Completion & Commissioning of 360 kms Pipeline Ext.
Project From Mahmood Kot to Sheikupura near Lahore Via 1997
Faisalabad
Commissioning of PARCO Mid Country Refinery (MCR)
2000-2001
with a 4.5 MT/ p.a capacity
Launching of Marketing Operations of PEARL in
partnership with SHV & OMV and incorporation of a Joint
2000-2001
Venture Co. with TOTAL Fina Elf for development of retail
outlets.
Under current implementation: White Oil Pipeline Project
2002
(WOPP)

Operation Strategy
Operation strategy is concerned with setting broad policies and plan for using the production
resources of the firm to best support 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 Joint 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.

Advantages Of Refinery Location

¨ Sensible & strategic location from a commercial and national security point of view.

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

¨ 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.

¨ 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.
Process Decision
Must be made in PARCO when
1. A new or substantially modified, product a with improved quality
2. Demand for a product or service is changing,
3. Current performance is inadequate,
One of the first decision a manger makes in designing a well functioning operation is to choose a
process that best support 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. Crude unit
2. Vacuum Distillation Unit
3. Naphtha Hydro Treating Process Unit
4. CCR Plat Forming Process Unit
5. Diesel Mix Process Unit
6. Visbreaking unit
7. LPG Merox Processing Unit
8. Carosine Merox Process Unit
9. Gas Concentration Process Unit
10. 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
users. 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 user, sufficient Fuel Oil at pressures
and viscosities consistent with burner specifications on other user 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 passes
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 Arabian Light 60%

FEED
Upper Zakhum 40%
PRODUCTS (Metric Tons '000'/ Year)
LPG 202
Premium Gasoline HOBC 714
Kerosene Jet Fuel 1 (JP-1) 543
Jet Fuel 4 (JP-4) 47
High Speed Diesel Oil (HSD) 1,382
Low Speed Diesel Oil (LDO) 48
Furnace Oil 1,613
Sulphur 25
Total 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 CODE UNIT BPD

100 CRUDE DISTILLATION 100,000
110 VACUUM 42,800
DISTILLATION
200 NEPTHA 25650
HYDROTREATOR
300 CCR PLATFORMER 16350
284 DIESELMAX 22450
130 VISBREAKER 15560
801 KEROSENE MEROX 20000
802 LPG MEROX 4500
411 GAS CONSENTRATION Liquid: 22050
Gas: 11242
810 AMINE TREATING FG: 7721
SWS: 9963
820 SULPHER RECOVERY 115 MTPD
Storage Unit Capacity
 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) 5,000
HSD 56,000
KEROSENE 12,000
JP-1 16,000
OF 34,000
LDO 5,000
JP-4 4,000
LPG 2,000
CRUDE 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 terms 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 contact 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 terms 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.