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December 27, 2018

No more power making through furnace oil: PM

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December 27, 2018

ISLAMABAD: Prime Minister Imran Khan has asked the authorities concerned to notify the ban on import of furnace oil and implement it with true spirit and instead generate the electricity from LNG and coal in future at the maximum.

The prime minister directed that a detailed plan, in consultation with refineries, regarding up gradation of existing facilities and export of surplus furnace oil should be worked out on priority basis. The prime minister also asked for introduction of average gas price mechanism in the country by mixing up LNG with system gas. He took the said decisions while chairing a meeting of the Cabinet Committee on Energy at the Prime Minister Office, a senior official, who attended the meeting, told The News.

It is pertinent to mention that former prime minister Shahid Khan Abbasi had imposed ban on furnace oil but it was not notified, rather import had been linked with the demand from Power Division in summer season.

Now the furnace oil import ban will be notified and even in summer season the imported furnace oil will not be utilised for power generation. However, local refineries’ furnace oil will be used for power generation if the demand of electricity in summer season gets increased up to over 24,000MW. The reliance of electricity generation will be increased on LNG and coal. By next summer, another 1,200MW RLNG power plant at Trimmu will also come in stream.

Power Division’s top mandarins in the cabinet committee meeting were asked to come up with firm demand of LNG for four to six months so that LNG supply should be arranged well in time.

LNG has emerged as an alternate of costly furnace oil for electricity generation as LNG fuel cost for electricity generation is closed to Rs10 per unit, whereas the furnace oil-based electricity hovers close to Rs16 per unit. More importantly, LNG is environment friendly fuel that also increases the efficiency of the power plants to generate more electricity.

The premier also asked the authorities concerned to come up with recommendations on average gas price formula by mixing the LNG and system gas in next cabinet committee meeting which will help the LNG cost reduction and system gas increase, but it will be acceptable to all sectors of economy, a senior official told this correspondent.

Currently LNG is being used by Punjab consumers and power sector. However, all the sectors of economy in other provinces are using the system gas at a cheaper rate. But Article 158 of the Constitution says that the province which possesses the gas has the first right to utilise it and if the gas is additional then it could be passed on to the province where in gas is not produced up to the mark. Punjab is the province wherein gas production is just above 4 percent, but its demand is the highest in the country and this is the very reason that Punjab is using costly LNG.

Now the government intends to introduce the average gas price mechanism with an aim to increase the intake of LNG in the system and if it happens Pakistan economic activities will surge manifold. However, tough resistance may come from the other three provinces --- Punjab, Sindh and KP, which are producing gas. The average gas price mechanism, if implemented, will erase down the inequality in gas prices across the country. The average gas price will help increase the economic activities in industrial, commercial, CNG, fertiliser sectors.

The cabinet committee decided to form new boards of governors of Sui Northern, Sui Southern and PSO. Amendments to Ogra Ordinance were also approved. The Ministry of Petroleum was also directed by the cabinet committee to submit a detailed plan on reduction of losses due to unaccounted for gas (UFG).

Imran Khan also asked the refineries that they should have carved out their business in 2014-15 when RLNG-based power plants were being installed. Refineries need to export furnace oil after maintaining the furnace oil strategic reserves. The prime minister said that furnace oil lobby will not be encouraged to make money at the cost of the interest of masses.

Coming to the report of the fact finding committee headed by Ogra chairperson Uzma Adil, the prime minister asked the secretary petroleum to firm up the recommendations of the committee by December 28. In the meeting, it was decided to novate the agreement of PSO on LNG import with Pakistan LNG Limited (PLL). Now the agreement of PSO with Qatar on LNG import will be novated to PLL. Likewise, the agreement between Sui Southern and Engro LNG terminal will be novated with PLTL (Pakistan LNG Terminal Limited).

If it is done, PSO, which has no more business on furnace oil, will be deprived of LNG business too. The PSO official says it was PSO on whose face value the deal was done with Qatar on LNG import and it will be sheer injustice to the oil marketing company if its agreement is novated to PLL. PSO official said that LNG circular debt has increased to Rs35 billion and it is that PSO which is able to face such amount of circular debt in LNG sector and If LNG import regime is handed over to PLL, it will not be able to sustain the loss of Rs35billion circular debt that has emerged in LNG sector.

However, in the meeting, the premier was told that novation of the agreements to PLL will immediately enable the country to get advantage of $100 million which will go up to $500 million per year. Still no agreement exists between the PLL and Sui Northern for purchase of LNG. The PM asked the secretary petroleum to furnish the recommendations on these issues by December 28.

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