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Refineries on verge of closure

Updated November 14, 2017


Attock Refinery has requested the government to resolve the issue on a war-footing.
Attock Refinery has requested the government to resolve the issue on a war-footing.

ISLAMABAD: The domestic oil refineries have warned the government of their imminent closure and resultant disruption in supply chain of petroleum products owing to continuous shut down of oil-based power plants both in the public and private sector.

In an SOS to the Power Division of the Ministry of Energy, the Rawalpindi-based Attock Refinery Ltd (ARL) reported serious operational difficulties that would not only widespread shortages of petroleum products in the entire northern region but could also lead to forced closure of oil fields in Khyber Pakhtunkhwa and Pothwar region.

But that is not all. Almost all the domestic refineries have been forced to run on sub-optimal capacity following a decision of Prime Minister Shahid Khaqan Abbasi to close down oil-based plants to facilitate maximum utilisation of liquefied natural gas.

The Oil Companies Advisory Council (OCAC) has already protested over the decision without prior arrangement for product uplift.

“We request you for addressing the issue on an urgent basis failing which refinery will have no option but to go for a shutdown which will cause widespread shortages of products in our region,” Chief Executive Officer of ARL Adil Khattak wrote to the secretary petroleum and director general oil.

ARL is the only refinery in the north meeting oil requirements beyond Gujrat to Rawalpindi-Islamabad, Azad Kashmir, KP and Gilgit-Baltistan.

Acting Secretary Petroleum Sultan Sikandar Raja did not respond to requests for comment on the product supply situation as the stocks of two major products petrol and diesel fell to 12 and 16 days cover against mandatory commercial stocks of at least 21 days. The stocks of light diesel and kerosene were even lower at 7-8 days.

Shutdown will cause widespread shortage of products

In contrast, the furnace oil stocks are sufficient for a total of 26 days of cover. Kot Addu Power plant has storage capacity for 250 days, but 12 out of 18 oil-based power plants have no fuel stocks at all while three others have stocks for less than 7 days.

Mr Khattak told the secretary petroleum that “abrupt shutdown of IPPs running on furnace oil has resulted in serious ullage problems for ARL which has already significantly reduced its plant throughput, which will not only affect the supplies of motor gasoline, high-speed diesel (HSD) and jet fuels to oil marketing companies (OMCs) in this region but will also affect crude receipts from the fields that is being processed at ARL”.

The problem had been aggravated by poor planning at the government level as Pakistan State Oil (PSO), despite its stuck up amounts of more than Rs307 billion, had booked six ships full of furnace oil from abroad on the instructions of the power sector as late as Oct 25 even though Prime Minister Abbasi ordered closure of oil-based plants two days later ie Oct 27.

PSO is reported to have cancelled a couple of orders but a shipload of furnace oil was still standing outside Karachi Port. However its decanting was not being allowed due to heavy stocks at home with no consumption.

When contacted, Mr Khattak confirmed that his refineries was currently running on 70pc throughput (handling around 40,000 barrels per day instead of 54,000 barrels per day) but this could not go on for long.

He said Attock Group’s own IPP Attockgen had also been closed down since Saturday which used to consume a significant part of furnace oil production. “There is a very serious issue and needs to be resolved on an urgent basis,” he said.

An official in the Petroleum Division said all the refineries in the country were currently running at 70-75pc capacity and their storage tanks were full to capacity. The problem was that curtailment of production of one product automatically lea­ds to reduction of all other products.

The OCAC had last week told the government that all refineries would be forced to close down in a few days because their furnace oil storages were topped up and the government would be forced to import of other products to keep the transportation moving.

An official said the prime minister had created Ministry of Energy by merging the ministries of water and power and petroleum, but the newly created power, water and petroleum divisions were still operating in separate islands without a full time minister for energy for effective coordination of related matters.

The OCAC has warned the government that if the situation is not rectified on a war-footing, the refineries will shut down within next week on account of lack of furnace oil ullage and this will result shortage of all products across the country.

Published in Dawn, November 14th, 2017