PSO’s inability to maintain fuel supply to hit power generation

ISLAMABAD: While the government has managed to decorate a feather in its cap by increasing the electricity generation by up to 19,244 MW with main share of thermal power generation of 13,000 MW, but at the same time it has put Pakistan State Oil (PSO) on the tight rope that ensures over 67% electricity generation from thermal sources through incessant supply of furnace oil and LNG to power houses, a senior official in ministry of petroleum and natural resources told The News. 

And in the days to come, the official apprehended, thermal generation is feared to face a set-back as PSO may not be in a position to keep continuing the supply chain of fuel to thermal power houses on account of increasing cash flow situation arisen out of the emergence of mammoth circular debt of over Rs451 billion in the power sector. And because of this reason receivables of PSO have increased to over Rs300 billion mainly from power sector, Sui Northern and PIA. "This may result in massive reduction in electricity generation in the ongoing summer season with mercury ranging up to 50 centigrade in various parts of the country." 

Power generation has seen the highest level of 19,244 MW on June 3, 2017 with around 13,000 MW thermal generation and 6,000 MW from Hydel and the balance from other sources. "This is a remarkable achievement that can only be sustained if the PSO is provided an immediate relief of over Rs165 billion to maintain the supply of fuel and LNG to power houses and wave of its financial liabilities."

So far PSO has itself arranged Rs142 billion through commercial borrowing from banks to maintain the energy supply to power houses, but this mode is not practicable any more as the electricity end consumers are liable to pay the interest cost in the bills for the loans that is borrowed by the state owned oil marketing entity and more importantly, the power sector needs to be forced to pay Rs257 billion to the cash strapped entity.

When contacted Minister of Petroleum and Natural Resources Shahid Khaqan Abbasi said that his ministry is engaged with power & water and finance ministries for the required payments to PSO.

With more than 67% of generation being from thermal sources, the official said, the IPPs and Gencos require a seamless supply of Furnace Oil andGas especially given the fact that IPPs and Gencos continue not to maintain mandatory days stocks.

PSO on annual average basis has imported and maintained supplies of around 575,000 tons per month of both HSFO and LSFO (9% above last year average), with the current demand in the high consumption months reaching 750,000 tons valued around Rs 40 billion every month to Muzaffargarh (1,050 MW), Jamshoro (700 MW), HUBCO (1,292 MW), KAPCO (1,336 MW), K Electric (800 MW) and other IPPs (1,076 MW); despite 36% higher HSFO consumption compared to lower estimated demand of MW&P during the last 3 months. 

In addition, PSO has maintained the supply chain of LNG in the country by bringing every month 6 vessels of LNG, equivalent to 600 mmscfd Gas since Feb 2017 , which is almost 15% of the country’s indigenous natural gas supply and valuing around Rs. 15 billion a month. Last year started with 200 mmscfd and increased to 400 mmscfd by end of 2016.

Most of this LNG is being used to produce electricity, in KAPCO (1,336 MW), Rousch Power (370 MW), FKPCL (135 MW) and the newly commissioned Power Plants at Bhikki (1200 MW) and Haveli Bahadur Shah (1,200 MW).