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Oil supply chain disrupted, OCAC warns

Updated November 17, 2017

ISLAMABAD: The country’s oil supply chain might be choking up following the government’s abrupt decision to shut down furnace oil-based power plants that were feeding up to 8,000 megawatts into the system.

In a sharp letter sent to the secretary petroleum on Thursday, the Oil Companies Advisory Council (OCAC), the industry’s representative body, warned that all refineries have been forced to reduce throughput to 70 per cent of their capacity.

This is “also affecting the availability of other products, namely petrol, high speed diesel and jet fuels — both JP-1 for Pakistan International Airlines and JP-8 for Pakistan Airforce”, the OCAC said.

Jet fuel could be next, supplies to capital airport at risk

Attock Refinery Limited was “in fact heading towards a total shutdown and thereafter not only will the product availability be affected as for the other refineries but JP-1 supplies to Islamabad Airport will totally stop” the letters says.

The official said the ARL had separately asked the government to make alternate arrangements in case of its imminent closure. He said the secretary petroleum and director general oil could do little to resolve the issue in view of an abrupt decision made by the prime minister to shut down oil based power plants. The secretary petroleum declined to officially speak on the situation.

Moreover, given the fact that ARL was dependent solely on indigenous crude, its shut down will “also mean shutdown of the Northern Oil fields as well as the associated gas”, the OCAC said.

The OCAC also told the government that apart from domestic refining, the Pakistan State Oil and already lined up a total of eight import cargos including carryover from the previous month and “berthing their HSFO tankers is already seriously compromised and causing demurrage issues”.

If the cargoes have to be returned or canceled, this will entail penalties also to a firm whose receivables had already gone beyond Rs308 billion.

The domestic refineries are responsible for 30pc of high and low sulphur furnace oil supplies which comes to around 300,000 tonnes per month while PSO is responsible for about 66 per cent of the total HSFO/LSFO supplies with other importers catering for the remainder.

“If this situation is not alleviated, it will result in widespread shortages of all the other products across the country”, the OCAC wrote. It called for the creation of a forum to plan energy supplies for the country for at least three months on urgent basis.

Separately, the Rawalpindi-based Attock Refinery Limtied also asked the government to make alternate arrangements for disposal of crude produced in Potohar and Khyber Pakhtunkhwa which could also impact natural gas supplies as well.

“ARL will completely shutdown in next 4 to 5 days if the upliftment does not improve”, it wrote according to petroleum division sources.

In case of shutdown or operation at lower throughput, “ARL will not be able to absorb crude supplies from producers (exploration and production companies) who need to be informed to make alternate arrangements for their crude disposal. Disruption in crude supplies can also impact gas supplies from fields”.

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

Pakistan State Oil (PSO) booked six vessels of furnace oil for import on the instructions of the power sector as late as October 25. Two days later, Prime Minister Abbassi ordered closure of all oil based plants to facilitate maximum utilization of LNG.

Published in Dawn, November 17th, 2017