The energy mix, especially in power sector, is shifting from FO dominated power plants to RLNG and coal. While the concentrations of hydel, nuclear and renewable are increasing. The adverse impact of increased reliance on RLNG and coal is on local refineries’ production.
The problem started surfacing a month back; when the sitting government all of a sudden decided to shut down FO based old power plants as the second RLNG terminal was about to be completed. But no one thought about the impact on the FO imports that PSO had already committed, and more importantly, the fate of local refineries which have to produce all the oil products simultaneously.
After weeks of hue and cry from PSO and local refineries, finally some of the FO plants are back in action. The Attock Refinery is back to 90 percent production while some of the refineries are still closed in the country. Almost 70 percent of previous year’s FO demand was on imported oil; hence doing away from FO based power generation can have some foreign exchange savings.
The short term problem arose as PSO had already imported FO with all its storage topped up, two ships of FO are standing at port for over 10 days with PSO paying demurrages on it. And a few refineries have stopped producing any fuel due to no FO demand. There is a case of acute shortage of jet fuel and similar shortages can take place in petrol and diesel demand.
This acute problem can be dealt with no further import of FO and all the consumption should rely on domestic production. But with new power generation coming on all kind of fuel and alternate energy sources but FO, time is not far when domestically produced FO would not be in demand.
What to do in long term for this problem? One option is to have mechanism of FO exports. But moving FO from up country to port will have high costs; and the question is who would bear that cost? Secondly, the world is moving away from FO as the global supply is higher than demand. How can we find a reliable consistent importer of FO in the long run?
There are too many ifs and buts in FO export; there has to be an alternate solution. One way is to have deep conversion refineries across the board as they can produce fuel other than FO. But that seems like a non-viable solution.
The other option is to install one hydro cracker plant in the middle of the country, somewhere near Parco. Hydro cracker plant can convert FO into other fuels. It’s a capital intensive option which takes 4-5 years from conceptualization to completion.
The country’s fuel demand is ought to grow and refining capacity should grow in tandem to lower the import bill.
FO is the choice of fuel of the past; and in 5 years time, there probably would be zero demand of FO in the country with a very few choices to export.
It’s time for newly formed energy ministry under PM Abbasi to start working on a hydro cracker plant.
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