Refineries forced to export products as power plants not lifting FO

ISLAMABAD: Power plants are reportedly not lifting furnace oil as per firm demand due to which refineries are compelled to export their products, which may create shortage during peak summer, well-informed sources told Business Recorder.

Currently National Power Control Centre (NPCC), the system operator, is applying 2-4 hours scheduled loadshedding in rural and urban areas, whereas those areas where losses are high, loadshedding duration is more than 8-18 hours.

On Tuesday average demand was hovering around 21,500 MT whereas generation was 17,500 MW, showing a shortfall of 4,000 MW. The government intends to generate minimum electricity on furnace oil as its generation is costlier compared to RLNG and other fuels.

Initially, Petroleum Division, in its Office Memorandum (OM) of April 5, 2023 had sought plant-wise breakup of Residual Fuel Oil (RFO) demand for May 2023 onwards which is still awaited.

Petroleum Division through letters of February 7, 2023, February 17, 2023, March 3, 2023, March 22, 2023 and April 5, 2023 requested Power Division to advise power plants to ensure upliftment as per firm requirements of RFO during March-September, 2023 but there has been no improvement as there has been a considerable shortfall in the demand placed and actual upliftment of RFO.

According to the details shared by Petroleum Division, in January 2023 NPCC’s firm demand was 97,300 MT whereas actual upliftment by power plant was 57,000MT (59 per cent) which implies short lifted quantity was 40,000 MT. In February, power plants uplifted just 36,000 MT (33 per cent) against NPCC’s firm demand of 109,500 MT, showing short uplifting of 73,500 MT.

In March, power plants lifted 21,694 MT (21 per cent) against firm demand of 103,000 MT (short by 81,300 MT) while in April, 16,048MT (15 per cent) was uplifted by power plants verses firm demand of 110, 568 MT, short uplifting of 94,520 MT.

Petroleum Division argues that due to short uplifting by the power plants and in turn by the Oil Marketing Companies, refineries have been forced to export excess furnace oil in order to sustain their throughput without compromising production of High Speed Diesel (HSD)/Motor Spirit (MS).

Petroleum Division maintains that Pak Arab Refinery Limited (PARCO) has already exported two furnace oil cargoes of 49,600 MT and 54,000 MT while one cargo of 50,000 MT will be exported soon. Pakistan Refinery Limited (PRL) has also exported two cargoes of 23045 MT and 27,354 MT.

“As refineries are exporting their surplus RFO to sustain their throughput levels, the oil industry will be unable to meet peak summer months’ demand from local resources, if the same trend of upliftment continues during May 2023 also,” the sources quoted Imran Ahmad, Director General (Oil) as saying in his communication.

Petroleum Division has again requested that power plants be advised to ensure upliftment- as the demand placed in order to improve stocks and to avoid disruption of supply chain due to accumulation of furnace oil and ullage constraints faced by refineries. Moreover, Petroleum Division has sought plant-wise firm requirement of RFO during May to September 2023 at the earliest so that OMCs can develop respective supply plans.

Copyright Business Recorder, 2023