ISLAMABAD: In the wake of the abrupt decision of the government not to run the less efficient power plants based on furnace oil and diesel, closure of all refineries of Pakistan is on the cards by next week as their storages are topped up with furnace oil and do not have any more capacity to store other products, according to the OCAC's (Oil Companies’ Advisory Council) letter to the secretary petroleum and natural resources division, written on November 3.
Whether the decision was taken due to prevailing smog in the green areas of Punjab or it was a new policy of the government to slash cost of producing electricity is not clear.
The OCAC in its correspondence to the petroleum division, a copy of which is available with The News has issued a warning, arguing if the situation is not rectified on war-footing, the refineries will shut down within next week on account of lack of furnace oil ullage and this will result in widespread shortages of all the other products across the country which is clearly an undesirable situation. The OCAC has sought the immediate intervention of the petroleum division to avert the closure of the refineries.
More importantly, the Pakistan State Oil (PSO) is also in a fix as it has already confirmed booking of six cargoes carrying furnace oil of 65,000-70,000 metric tons each and each cargo carries the fuel of $25 million meaning by that six cargoes' cost stand at $125 million, a senior official at petroleum division said, adding: "If the said fuel is not used by the power plants and the cargoes are not off loaded, then PSO will face the 10,000 dollars as demurrages per day on each cargo. This will expose the state-owned OMC (oil marketing company) of which receivables have risen to over Rs300 billion and is in huge financial crunch, to another deep trouble."
The top decision makers of the government, he said, in a meeting held on October 27 with Prime Minister Shahid Khaqan Abbasi in the chair
took an abrupt decision not to run the power plants on diesel and furnace oil and convert them on gas as fuel without taking the industry in the loop. The decision was taken to avoid running the costly power plants to prevail upon the cash flow situation and to reduce adverse impact of the circular debt.
The government wants to run the power plants on gas and also aspires for the conversion of the existing power houses running on costly furnace oil and diesel. But the sudden notifications by power plants to OMCs (oil marketing companies) supplying furnace oil to them that they will no longer be able to uplift product for them, creates turmoil for them says OCAC letter with headline on 'Ramifications due to shutdown of power plants: Potential of breakdown of Oil Industry supply chain' available with The News, adding: "This has resulted in severe curtailment of furnace oil to power plants resulting in PSO's storage being topped up. In turn, PSO is not able to uplift stock from refineries and the ullage available for furnace oil at the refineries is depleting very quickly -- Pak Arab Refinery Company (Parco) and Byco have 2-3 days of fuel oil ullage and PRL (Pakistan Refinery Limited) and NRL (National Refinery Limited) have 5-6 days ullage of available at their sites."
However, the PSO came down heavily on OCAC for giving the wrong impression that the state-owned OMC is responsible for uplifting the furnace oil stock of local refineries and said it uplifts 30 percent of furnace oil from the local refineries and the remaining 70 percent is lifted by other oil marketing companies. The PSO also mentioned in its response, a copy of which is also available with The News, that the issues related to non-uplift of locally produced furnace oil by the other OMCs constitutes a sizable 70 percent remaining volume have not been conveyed in OCAC's letter to the government.
In the letter, OCAC also mentioned saying: "PSO currently has 400,000 metric tons of furnace oil import planned for the current month of November and these ships will be standing off shore incurring demurrages."
The OCAC in its letter has also asked the government to set up a proper forum for planning of energy supplies and mentioned that this was the second time that such sort of critical situation had occurred purely because of the lack of planning and coordination on part of the national power control cell (NPCC) and the power sector, as this situation has put the entire country's oil supply chain at risk.
The PSO also in its correspondence said: "We are proposing number of remedial measures to the government for future and have invited their urgent intervention to circumvent the arising critical situation. We should also discuss and investigate the matter on industry level to determine the drastic reduction in local refineries uplift by other OMCs so a concrete course of action could be chalked out for avoiding such incidence in future."
Sabah adds: Meanwhile, the Ministry of Power has directed the distribution companies to ensure zero loadshedding in the country.
The spokesperson of power division in a statement said that 12,400 megawatt of power is available in the system which is sufficient to meet the current demand.
The spokesperson said that ground teams of National Transmission and Distribution Company are patrolling the high transmission lines to avoid tripping due to smog.
