Power Division refuses to collect fuel oil from refineries

KARACHI: Power Division has refused to collect furnace oil (FO) from local refineries for power plants if they did not come on the merit list, The News learnt on Wednesday.

The piling up of furnace oil at local refineries, especially at Attock Refinery Limited (ARL) has turned into a crisis for the local refining sector. A meeting of local refineries was held with the Power Division and Petroleum Division of the Ministry of Energy on Wednesday to ponder over the situation.

According to sources familiar with the deliberations at the meeting, the Power Division explicitly told the participants that it could not lift furnace oil for power plants, unless the refineries offered deferred payments.

“We will not lift the FO for power plants, which don’t come in the merit list, which is devised to go first for the cheap source of power generation,” sources quoting the Power Division officials revealed.

Sources disclosed that the Power Division said the fuel oil would be collected on deferred payments, if refineries agreed on this option.

However representatives of the refineries did not agree to the suggestion put

forward by the Power Division as they would otherwise face financial hardships in buying crude oil from the international market.

Sources said that the piling up of oil stocks at the local refineries has started hitting all the local refineries.

However, ARL was faced with an acute problem compared to other refineries and might close down its operations shortly, if the inventory was not collected on an immediate basis.

During the meeting, refineries were also asked to explore the option of exporting furnace oil, but no agreement was reached on the suggestion as representatives of the refineries considered it a financially unviable option.

According to the oil sector officials, piling up of furnace oil stocks was leading to low production capacity at local refineries, which might cost the government dearly in terms of the loss of foreign exchange.

Sources pointed out that if refineries would operate on low capacity due to non-consumption of furnace, they would have to stop or reduce the production of diesel. This, they pointed out would also impact the country’s foreign exchange position, as to meet the domestic diesel demand, the government would have to import the important fuel.

The refusal of the Power Division to lift furnace oil would be financially damaging as the country was already facing a shortage of foreign exchange, and spending on diesel import would drain more dollars, sources pointed out.