October 24, 2003	Friday	Sha’aban 27, 1424

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ISLAMABAD, Oct 23: The country is likely to face a fuel shortage crisis over the next few weeks as local oil refineries have cut capacity utilization by 40 per cent owing to heavy stockpiles of furnace oil, informed sources told Dawn on Thursday.

The immediate problem is that refineries have furnace oil stocks sufficient for 100 days’ consumption which have filled the storage capacity to its brim. That is why, they are left with no other option but to scale down production.

The consumption of Wapda, the largest furnace oil consumer, has shrunk drastically due to enhanced hydel power generation and increased gas supplies from the new fields. At present, the refineries are running at 60 per cent of their capacity, officials said.

As a result, the production of liquefied petroleum gas (LPG), a by-product of furnace oil, has already registered a decline and its prices have started rising.

The marketing companies of LPG are lining up their import arrangements to meet local demand in view of the anticipated rise in its consumption during the winter season, a petroleum ministry official said.

Also, the government would have to make special arrangements to import various petroleum products at higher rates and lose substantial foreign exchange in consequence, while local refineries would face losses on account of reduced capacity utilization.

The official said the production of petrol and jet fuel had already dropped. Certain mid-country areas like Multan “have started facing shortage of petrol” and price of jet fuel and petrol were bound to increase due to reduced local production.

The petroleum ministry has asked Wapda to lift maximum furnace oil quantities and the refineries to increase their production, he said. The refineries have, however, informed the ministry that they cannot not increase production unless the furnace oil stocks are slashed.

Wapda, on the other hand, is of the view that it could not lift fuel oil more than its requirement. Moreover, it also had long-term import contracts with foreign suppliers.

The refineries, these sources said, were giving preference to producing higher quantities of kerosene oil than jet fuel. The government has asked them to also increase the jet fuel production.

The refineries have, however, informed the government that the production cost of jet fuel and kerosene oil was the same but the sale price of kerosene oil was higher. Hence, if they were assured of jet fuel sale at the price of kerosene oil, they could boost jet fuel production.

Diesel and kerosene prices would remain unaffected due to varying reasons. Most of the diesel requirement is already being met through imports while local kerosene production is higher due to price differential with jet fuel, the sources said.

If the trend continued, the country’s import bill would surpass that of last year’s. Pakistan’s total oil imports amounted to around $3.06 billion during 2002-03, up by around 10 per cent against oil imports made a year earlier.

Total oil imports (both crude and POL) range around 20 million tons. Pakistan’s crude oil requirement is around 5.5 million tons at the rate of around 100,000 barrels per day (BPD). This includes around 55,000 BPD of Arabian light, about 25,000 BPD of Iranian light and about 10,000 BPD of Upper Zakum.