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April 18, 2018

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Govt backtracks on furnace oil import ban, allows PSO to start shipments

ISLAMABAD: Government on Tuesday backed out a plan to stop import of furnace oil as gas shortfall compelled it to resume the fuel imports for power generation, while approving almost Rs10 billion of guarantee for financing of transmission projects.

The Economic Coordination Committee (ECC) of the cabinet took the decisions during a meeting headed by Prime Minister Shahid Khaqan Abbasi at the Prime Minister’s Office.

The ECC accorded an approval to state-owned Pakistan State Oil to import furnace oil for supply to power generation plants.

“The decision has been made to cater for maintaining adequate fuel stock in the coming months,” a government statement said.

The approval to furnace oil import was a shift from the government’s announcement last year to phase out the use of imported fuel in the power generation and instead rely on local substitutes.

In December last year, Prime Minister Abbasi said the country would stop importing furnace oil in 2018, as industries which ran on furnace oil were shifting to gas.

Currently, Pakistan has two liquefied natural gas (LNG) terminals with capacity to produce 1.2 billion cubic feet/day (bcfd) of re-gasified LNG.

Shortfall in natural gas, which is contributing nearly 46 percent to the country’s primary energy supply mix, is likely to increase to 3.9bcfd in the fiscal year of 2019/20 and 6.6bcfd by FY2030.

Jamshoro and Northern power plants, with production capacity of 2,500 megawatts, have been on ‘standby mode’ since November 2017 because of shortage of natural gas and cut in furnace oil supply.

Sales of furnace oil fell 23 percent to 5.265 million tons during the first nine months of the current fiscal year of 2017/18, Taurus Securities said in an update on oil and marketing companies sector.

The Economic Coordination Committee also approved the issuance of government sovereign guarantee against financing facility of Rs9.846 billion from local banks for National Transmission and Dispatch Company (NTDC) projects in order to ensure stable and reliable power supply through grid system and to enhance NTDC system capacity.

The committee further approved transportation tariff for Machike – Taru Jabba oil pipeline project of 427 kilometres. Oil and Gas Regulatory Authority will ratify the tariffs after due process.

“The project will be completed in three sections and envisages environment friendly and safe movement of fuel,” the statement added.

“The project will also provide for additional storage of fuel and enable supply to major distribution centres in central and northern Punjab and Khyber Pakhtunkhwa.”

The ECC meeting said all future pipeline projects would require approval of the federal cabinet.

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