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ISLAMABAD: Local refineries have asked the federal government to take immediate measures for High Sulphur Furnace Oil (HSFO) upliftment from the refineries to safeguard the strategic assets of the country.

Local refineries have warned the federal government through a SOS call that they are heading towards a forced refinery shutdown, which will disturb the supply chain of MS (motor spirit), HSD (high speed diesel), and jet fuel in the country.

Sources said that the refineries have deeply analysed the market situation and approached every customer to lift HSFO before approaching director general (Oil), Ministry of Energy (Petroleum Division) and inform him about availability of high stocks of HSFO by refineries.

Refineries informed director general Oil, Petroleum Division that all of the customers have refused to lift the HSFO due to non-burning/con-consumption by the IPPs.

The IPPs are bound to stock 30 days of HSFO and all power plants storage is currently underutilised, which evidently is severely affecting all local refineries.

“All in all, the situation of local refineries requires immediate action from the Ministry of Energy to compensate and accommodate enabling the refineries to ensure refinery continuity. We reiterate that until and unless the IPPs increase HSFO burning/consumption, there is no way to keep up the refinery operations,” said a letter of a local refinery to the DG (Oil), Petroleum Division.

However, to the dismay of refineries, the export option is clearly not viable due to certain major reasons including port congestion issues at the KPT and the FOTCO, which is a unanimous concern poof the local industry, negligible demand of HSFO in international market and huge financial losses in order to carry out above 30 KT HSFO stocks in the storage of refineries for over a month as their lay can is 25-27 December, 2021.

“Refineries have floated HSFO export tender last week and yet not received any workable offer,” said a refinery in a letter to the DG Oil, Petroleum Division.

It is also learnt from sources that the IPPs are not holding stocks as per the fuel supply agreement, which is an integral part of the Power Purchase Agreement, on which they are enjoying 15 percent IRR on equity and 70 percent take or pay on capacity.

However, refineries have urged from the energy ministry that it (the MoE) should ensure that they use the proceeds to replenish their HSWFO stock as a matter of priority and per their contractual commitment.

Copyright Business Recorder, 2021

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