OCAC’s solution aimed at rescuing local refineries?

ISLAMABAD: Oil Companies Advisory Council (OCAC) has proposed to the Ministry of Energy (MoE) to continue generating 1,500MW electricity on HSFO for five years as win-win solution to rescue local refineries.

This proposal was floated by Secretary General OCAC in a letter to the Minister for Energy, Hammad Azhar.

According to the letter, the refining industry is critical, serving as the backbone of an economy, as it ensures fuel supply security. The product state of any given refinery is largely fixed based on its configuration. All of Pakistan’s refineries were configured in part to cater to a significant demand of Furnace Oil (FO) in the country, mainly from the power sector.

The share of FO in the power generation mix has been reduced significantly, which has drastically reduced FO demand and consequently, this has created a crisis for the refining industry and all the sectors that rely on consistent local supply of refined products including Defence sector.

OCAC says working on ‘refinery policy’

OCAC has acknowledged that in the long run FO will be an even smaller part of the power generation mix as new must-run power generation capacity is added to the system. To align with this, refineries are already working on possible solutions which would significantly reduce Fop production.

However, these solutions require significant capital expenditure and will require five years to implement. During this time, the lack of FO demand will not only put the sustainability of the refineries under serious threat, but will also put at risk our national fuel security.

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“To address this short to medium term challenge, we propose that an appropriate share of FO in the power mix be maintained. Consistently operating 1,500 MW of HSFO-based power generation units would generate an annual demand of around 3 million tons, and sustaining this demand for five years (till upgrade projects are implemented) would allow local refineries to operate at optimal utilization levels and consequently secure the country’s fuel supply chain,” said OCAC Secretary General in his letter.

OCAC further maintained that while this proposal may not align with the Government’s plan for the evolution of the power mix, it is a temporary measure and in the broader national perspective, it will have substantial benefits for the economy. The overall impact on power generation cost would; however, be minimal as 1,500MM is less than 10% of the average annual power demand of the country.

The Council has requested the Minister to consider this proposal in the broader national interest and the benefits it would deliver. “We look forward to discussing this with the Ministry further to develop a sustainable solution for the industry and the nation,” the letter concludes.

Copyright Business Recorder, 2022