ECC permission for components' import sought: power sector furnace oil blending locally

The Pakistan State Oil (PSO), the Overseas Oil Trading Company (Pvt) Ltd (OOTC) and Bakri Trading Company Pakistan (BTCP) have sought permission to import high viscous furnace oil (FO) and blending component products to blend furnace oil locally as per power sector specification requirements in the country, Business Recorder has learnt.
The blending of high viscous furnace oil to match Pakistan specifications involves additional cost, associated with multiple port charges for loading and unloading of products, high freight cost, blending cost, heating and other operating charges at around $2 to $3 per ton or about $18 million to $27 million per annum.
"All stakeholders have agreed with the proposal and the terms and conditions, standing operating procedure (SOP) and specifications for blending furnace oil locally have also been developed in this regard," sources said. The Ministry of Petroleum is going to propose to the ECC that "blending furnace oil be allowed to those OMCs that have adequate infrastructure to blend high viscous furnace oil while fulfilling the terms and conditions, specifications and SOP".
Sources said that the proposal to blend high viscous furnace oil had been discussed with all oil marketing companies (OMCs), refineries, the Hydrocarbon Development Institute of Pakistan (HDIP) and the Oil and Gas Regulatory Authority (Ogra), and the proposal had been supported by all, as it would provide alternative source of cheaper fuel supply. "The blending of furnace oil in the country will not only bring blending technology, socio-economic benefits, and additional employment opportunity but will also encourage investment in the oil sector," sources added.
PSO, being the major furnace oil supplier for the thermal power and industry under Fuel Supply Agreements (FSAs), imports furnace oil mainly from the Gulf region. Refineries of the Gulf region produce and market highly viscous furnace oil, ranging from 282 centistokes (CST) to 450 CST grades, which do not conform to Pakistan's import specifications. The suppliers of furnace oil, therefore, blend the product by adding cutter stocks i.e low quality diesel or kerosene, etc, at Fujairah and other Gulf ports and thereafter market to the buyers.
The pricing and import of furnace oil has been deregulated since July 2000 and OMCs, bulk consumers and traders are allowed to import and market according to their own commercial agreements. As per notification, only 125/180 CST grade furnace oil is being marketed/ imported to meet local demand mainly for thermal power plants in the country. The domestic furnace oil demand is about 9 million tons, of which the local refineries produce about 2.5 million tons, while the remaining quantity is imported.