The oil refining sector is currently looking for a way out as Independent Power Producers (IPPs) are refusing to lift locally-processed furnace oil as inventory for emergency use.
The Chairman of Cnergyico PK Ltd. (previously Byco Petroleum), Mohammad Wasi Khan, stated in an interview with DAWN that independent power producers (IPPs) are still not lifting locally processed furnace oil that they are required to store on their premises for emergency usage.
All the refineries are currently running at reduced capacity. After adjusting for different factors, their ideal furnace oil throughput is around three million tons per year, which amounts to an average production of 8,000 to 9,000 tons per day.
Khan stated that the current production is expected to be 3,000 to 4,000 tons a day because the refineries’ own depots are nearly full. He remarked, “It’s highly challenging for the local refineries to maintain their operations under these circumstances”.
Local processors had initially raised the issue over a month ago but operational constraints continue to hamper the oil refining activity.
Khan advised the government to set aside at least 1,500 MW of power generation capacity for furnace oil.
Scientifically speaking, generating one MW of power requires around five tonnes of furnace oil, which means that the 8,000 tons of locally produced furnace oil should be enough to generate 1,500 to 1,600 MW per day, he said.
Also, allowing refineries to remain open will result in the local production of gasoline, diesel, and jet fuel for domestic use, reducing reliance on imports.
“Earmarking 1,500 MW (for furnace oil) should be manageable, particularly when it’s resolving a country-wide energy supply chain issue. Refineries running consistently and utilizing their optimum capacities will address at least one of the critical variables in the supply chain parameters,” he suggested.
Previously, because of abnormally high worldwide LNG costs that had rattled global trade to the point of no return, Pakistan’s energy firms had bought surplus furnace oil for IPPs while forecasting an LNG shortfall during the winter. However, this blunder had left the five main refineries, including Cnergyico and National Refinery Limited (NRL), with a massive inventory of supplies that the IPPs had refused to lift, triggering an overstocking disaster in the local market.
IPPs are now lifting 5,000 to 6,000 tons of furnace oil per day from local refineries. According to the spokesperson for the Ministry of Energy, Muzzammil Aslam, the situation will improve once they start lifting to 15,000 tons per day, preferably after 10 January.
Source: Pro Pakistani