Blending of furnace oil: ECC ignores members' concerns about quality

The Economic Co-ordination Committee (ECC) of the cabinet has reportedly ignored concerns of its own members about quality and control of locally blended high viscous furnace oil by the oil marketing companies (OMCs). The ECC in its meeting on June 30, 2011, presided over by the Minister for Water and Power Naveed Qamar, had allowed the OMCs with appropriate infrastructure to blend high viscous furnace oil, subject to fulfilment of prescribed terms and conditions, SoP and quality control.
Official documents available with Business Recorder suggest that the Ministry of Petroleum and Natural Resources informed the ECC that Pakistan's annual demand of furnace oil is about 9 million tons, of which local product is about 2.5 million tons. The remaining quantity of 6.5 million tons is imported. During 2009-10, import bill for furnace oil was $3.2 billion. With the addition of new power projects, demand for furnace oil during 2010-11 was projected at about 13 million tons and is estimated to increase to 16 million tons by the year 2015-16.
The Ministry further said that pricing and import of furnace oil was deregulated in July 2000 and OMCs, bulk consumers and traders were allowed to import and market 125/180 CST grade furnace oil according to their own commercial arrangements. Pakistan State Oil (PSO) is the major furnace oil supplier and imports 282-450 CST grades furnace oil which does not conform to approved import specifications of 125/180 CST grade. Consequently, PSO blends the product by adding cutter stocks ie low quality diesel or kerosene, etc, at Fujairah and other Gulf ports and thereafter markets it to buyers. This process of blending involves additional cost of around $2 to 3 per ton or $18 to 27 million per annum.
The meeting was also informed that PSO and some other OMCs have sought permission of the Government of Pakistan (GoP) to import high viscous furnace oil and blending components with a view to blending the imported furnace oil locally for marketing as per specifications to the power sector.
It was further stated that the proposal of blending of high viscous furnace oil has been discussed with all concerned stakeholders, who supported it. Terms and condition, SoP and specifications for blending furnace oil locally have also been developed. The sponsoring Ministry proposed that the OMCs, which have sufficient infrastructure, may be allowed to blend high viscous furnace oil subject to completion of all codal formalities. It was also stated that blending furnace oil will not only bring blending technology, socio-economic benefits, additional employment opportunity, but will also encourage investment in the oil sector.
During the ensuing discussion, concerns were expressed about quality control. It was explained that blending would be done in accordance with the approved terms and conditions, SoP and specifications, and the ultimate users of blended fuel, namely the IPPs, would also be associated with the process. It was also stated that to ensure availability of quality product to the consumers, additional measures would be put in place. However, the ECC did not give proper weight to the concerns of the ECC members and cleared the Petroleum Ministry's proposal.