Government allows furnace oil export

ISLAMABAD: Government has allowed export of furnace oil and decided to stop the fuel import in a bid to help oil refineries ease their surplus that threatened to break down petroleum supply chain.

“We have asked refineries to increase their storage capacities and also allowed them to export the surplus, if they have.” Minister for Petroleum Ghulam Sarwar Khan told The News on Wednesday after a meeting of the Cabinet Committee on Energy.

The meeting was convened to resolve issues related to low offtakes of furnace oil from refineries with the fuel sales sharply falling around 70 percent in the first five months of the current fiscal year of 2018/19.

Khan said the ministry asked the oil refineries to shift their surplus to the storages of independent power producers (IPPs) and to enhance their storage capacities.

“Pakistan State Oil (PSO) was asked to stop its (furnace oil) import and meet the demand of the KE (K-Electric) from these refineries,” he added.

PSO imports furnace oil to meet power generation needs of K-Electric. The petroleum minister further said PSO imported furnace oil in October and “that would be sufficient for KE for now, but latter it would procure [furnace oil] from these refineries to meet the KE’s demands”.

Oil refineries last month proposed the government that a minimum of 10,000 metric tons/day of furnace oil should be made mandatory part of energy mix for electricity generation to ensure uniformity in production at refineries throughout the year. They feared shutdown as slow offtakes of furnace fuel oil left them with surplus and that could make their entire supply chain to break down. The Cabinet Committee on Energy decided that furnace oil would not be imported and asked oil refineries to work with their full capacity for short-term.

“Power sector [IPPs] can aid them in storage for next three months on credit,” a petroleum ministry’s statement said. “But oil refineries need to upgrade themselves.”

The refineries were asked to find export avenues as the decision of shift of furnace oil to power sector’s storage is for the short-term. The committee also formed a task force to bring forward recommendations on the issues facing oil refineries in the next month.

The meeting also decided that merit order should strictly be followed. “It would not be disturbed so that consumer can be provided with electricity at affordable prices,” it said. The merit order entails utilisation of low cost power sources first.

The committee further decided that a standard operating procedure would also be devised on gas supply from Sui Northern Gas Pipelines Limited to the power sector.

It would be discussed in the next meetings and the federal cabinet would ratify the decision after the finalisation.

The cabinet committee on energy also decided not to raise price of liquefied petroleum gas and asked the authorities to give relief to common consumers.