ISLAMABAD: Pakistan State Oil (PSO) and local refineries have raised serious concerns on slow upliftment of furnace oil by the power plants, which may lead to closure of refineries.
This warning has been issued by Director General (Oil) Ministry of Energy (Petroleum Division), Abdul Jabbar Memon, in a letter to Power Division.
According to the letter, on October 26, 2022, Petroleum Division stated that due to low upliftment/ order placement and non-payments by respective power plants PSO’s inventory has increased to an alarming level which is affecting the upliftment from local refineries. Now, PARCO and ARL have also intimated that FO stocks have increased alarmingly due to low upliftment and that furnace oil is causing ullage issues which will lead to curtailment in production or closure of refineries altogether in case the upliftment is not resumed immediately.
Director General (Oil) says that furnace oil demand for power in June 2022 was 423,729 MT, July 420,678 MT, August 417,007 MT, September 219,114 MT and October 2022 251,292 MT whereas upliftment in June 2020 was 278,423 MT, July 245,625 MT, August 2022 142,892 MT, September 166,526 MT and in October 59,227 MT. This implies that shortfall in upliftment in June 2022 was recorded at 145,306 MT, July 175,053 MT, August 274,113 MT, September 52,585 MT and in October 192,065 MT.
Refineries are currently, carrying about 74,000 MTs of furnace oil while PSO and other OMCs are carrying over 163,000 MTs as of October 31, 2022. The oil industry arranged product as per the firm demand placed by Power Division through various correspondences. Due to short upliftment during five months, the refineries and PSO are now facing ullage issues and also have to bear inventory losses besides imminent reduction in production.
In view of current scenario, Power Division has been proposed the following: (i) Power Division should direct power plants to uplift more for stock build up with power plants, as per mandatory stock requirements, so that there is no disruption in local refinery supplies; and (ii) share the customer-wise firm RFO requirements for the months of November, 2022 and November 2023 so that the oil industry can firm up their supply plans accordingly and devise appropriate future course of action.
On October 31, 2022, Pak–Arab Refinery Limited (PARCO), in its letter to Director General (Oil) intimated that upliftment of furnace oil from MCR by major customers has remained drastically low during the period October 1-30, 2022, i.e., only 2,312 MT/ day (average) is being uplifted against average daily production of 3,019 MT, resulting in accumulation of high furnace oil stocks at MRC, i.e., 31,312 MT.
According to the refinery, during a recent meeting, all refineries including PARCO were directed to ensure maximum MOGAS and HSD to rationalize POL products imports during November, 2022. However, OCAC reports furnace oil is being consumed only by K-Electric and there is no visibility of furnace oil actual demand/ consumption for November 2022.
The refinery maintains that it is a matter of serious concern and in the absence of a significant upward revision in furnace oil demand there will be high risk of closure of refineries with around 200,000 MT and as per report, currently, the industry (refineries & OMCs) is already holding stocks of around 234,863 MT (including LSFO) and power plants and an additional 167,576 MT of HSFO.
Attock Refinery Limited (ARL), in its letter to Atif Sajjad, Executive Director (Supply Chain) Oil & Gas Regulatory Authority (OGRA), has noted that its furnace oil inventories have increased significantly (about 28,000 tons) as of October 31, 2022 due to very little/ or no dispatches of LSFO/ FFO (Furnace Fuel Oil) and other IPPs. Resultantly, ARL is constrained to reduce refinery throughout from 90 per cent to about 75 per cent by shutting-down one of its crude distillation units, which has been taken to manage high stocks of FFO and avoid disruption in crude / gas supply chain.
KAPCO has sufficient ullage (of about 55,000 tons of LSFO) therefore there should be no issues of LSFO uplifting from ARL.
The refinery has requested the government to ensure it may operate at optimum levels requesting Secretary Power Division, to issue directions to PSO/KAPCO for resuming regular supplies from ARL so that the refinery operates without interruption.
Copyright Business Recorder, 2022