Senate body told about repercussions of possible closure of oil refineries

ISLAMABAD: The oil refiners who approached the Senate Standing Committee on Petroleum on Monday said that possible closure of refineries due to government’s not lifting furnace oil for power generation would lead to non-availability of local JP8 fuel for fighter jets in a situation when Pakistan’s defence is at high alert.

Chief Executive Officer Attock Refinery Limited Adil Khattak said this while informing the committee regarding the current status of the local oil refineries and their hardships, saying that the government’s policy decision of not lifting furnace oil (FO) for power generation is hard hitting their businesses and has brought them to the verge of closure. The refineries asked for government’s support through lifting of FO for power generation, as its price has come down sizably while its export is not possible due to its low price in international market.

The committee met here with the Senator Mohsin Aziz in the chair Monday as to discuss problems being faced by the oil refineries to carry on production. Refineries proposed to the Petroleum Division to have a separate merit order for fuel oil, and run the efficient power plants of about 2,000MW so that 7,000 to 9,000 metric tons/day of local FO production is consumed for the interim period.

The present financial health of local refineries would also have negative impact on foreign investments in refinery sector. The committee was informed that the indigenous and imported crude is refined by six major and two small oil refineries in the country having 19.37 million tons per annum (MTPA) refining capacity. Except PARCO which is semi conversion refinery, all other refineries are hydro skimming therefore struggling with efficiency issues.

Due to ban on its use in the power generation the product is being dumped in the storages. The refineries are running out of space and its refining capacity has decreased.

Senator Nauman Wazir questioned that if the refineries were shut down then who will provide jet fuel to the air force? CEO Attock Refinery said all the fuel requirements of the Air force is being met through local refinery and in case they were shut down, then the Jet fuel will be imported. In 1971 India has surrounded the country’s ports and now again there is tension between both the countries, he added.

“A month ago we have given recommendations to the government for the resolution of the issue and to make new policy for refineries and the government has agreed on the formation of working group on December 9, 2019 but since then no progress has been made,” Khattak maintained. Secretary Petroleum said that the issue will be resolved within two days.

CEO Khattak said reduced uplift of FO from refineries due to shutdown of FO-based power plants forcing refineries to run at lower throughput. “Refineries are losing around Rs35 to Rs80 million per day and low FO prices making their operation unsustainable”, he claimed.

He maintained that the refineries could not export FO as drastic reduction in FO price was recorded due to International Maritime Organisation (IMO) 2020 regulation mandating use of low sulfur fuel in ships from Jan 2020.

On the issue of gas supply to Sui, Senator Sarfaraz Bugti has threatened that he will resign from the Parliament if the Sui problems regarding gas supply has not been resolved. “I will resign from the Senate and if I have to pick up the arms, I will target you first, said Senator Sarfaraz Bugti while pointing towards PPL officials. Women are still burning wood in Sui and the areas where the gas available they carry loadshedding in those areas, he said.

Officials of the PPL said that due to safety reason gas supply is being stopped from 10 PM to 5 AM in those areas. ”We are being told that gas is being stopped during night because of safety reason,” he said and added that why you don’t stop gas from FC and Military college due to safety reasons? The committee also discussed the installation of LPG air mix plants in Balochistan.

Senator Mohsin Aziz said that SSGC has made a lot of delay in the installation of plants. Federal Energy Minister Omer Ayub said that the installation of plants is being funded by the federal government but who will pay the subsidy on these plants has yet to be decided.

Senators from Balochistan boycotted from the meeting over the remarks of the federal energy minister regarding high LPG air mix plants. The committee has directed the inauguration for Air Mix plant at Chaghi within ten days and Dalbandin by March 31, 2020.