January 24, 2002	Thursday	Ziqa’ad 9, 1422

ISLAMABAD, Jan 23: Wapda has decided to import furnace oil directly instead of purchasing it from local oil companies in view of its rising requirement in thermal power generation.

Wapda sources told Dawn that the power utility has decided in principal to import the product at its own to reduce intermediary costs charged by the oil marketing companies (OMCs) as its fuel requirement continues to grow due to dry spell.

“In fact, we are negotiating with Pakistan State Oil (PSO) to make available its storage and pumping facilities to Wapda at Bin Qasim and charge only for the relevant services and facilities like storage, handling and pumping,” the sources said.

Wapda would be the first ever and largest fuel oil consumer to enter into oil import business though only for its own consumption after Pakistan deregulated its petroleum sector around two years back.

Besides Wapda, PSO has long-term sovereign agreements for 30 years to supply furnace oil to all the independent power producers (IPPs) running on furnace oil and mixed cycle.

The Wapda believed that it was the country’s biggest consumer of furnace oil with around 100,000 tons to 150,000 tons per month consumption which sometimes go up to 200,000 tons per month.

It could find some sources abroad who would be willing to enter into long-term arrangements with the power utility for such a big chunk of secured sale at lower than market rates, the sources said.

Pakistan’s total furnace oil consumption is around $700 million to $1 billion per year depending on fluctuation in water reservoirs and hydel power generation.

The sources said that the federal government and PSO charged as many as 20 different taxes and charges on the sale of furnace oil which Wapda believed could be reduced significantly.

Wapda’s monthly furnace oil bill goes up to Rs2 billion per month that is passed on to the electricity consumers as a pass through item in the tariff.

The utility has been purchasing furnace oil from PSO for decades now but started looking for alternative sources like Shell Pakistan because PSO was allegedly charging high prices. For few months, it purchased furnace oil from Shell when PSO’s rates were higher but now the state-run oil company has reduced its prices.

Wapda had also attempted to import fuel through Keamari that cost around Rs300 per ton lower than PSO but this could not go on when the federal government imposed a $4.5 per ton tax on Keamari port.

Early this month, PSO lodged a protest with the federal government saying Wapda has created imbalance in its fuel oil volumes and business operations.

Last month, Wapda hydel power production almost stopped and gas fired generation reduced, which increased Wapda’s furnace oil requirement to around 200,000 tons amounting to around Rs2 billion.

Wapda said that after the government’s deregulation, it was not bound under any agreement to purchase exclusively from PSO at higher rates and was free to go for alternative sources it found economical.