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Furnace oil imports resumed

February 17, 2018

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Surface movement of furnace oil is a big challenge. The government has banned imports of the fuel to encourage LNG-based generation instead.
Surface movement of furnace oil is a big challenge. The government has banned imports of the fuel to encourage LNG-based generation instead.

ISLAMABAD: After a three-month moratorium, the government has ordered the state-run Pakistan State Oil (PSO) to arrange import of 180,000 tonnes of furnace oil for the power sector.

The directive came as the country’s largest fuel supplier is struggling to recover around Rs335 billion receivables mostly from the public sector entities and has been running from pillar to post for Rs100bn disbursements by the government. Its receivables have increased from Rs302bn since Oct 14, 2017.

The PSO has been asked to order three shipments of furnace oil, each containing 60,000 -65,000 tonnes, to meet fuel requirements of power plants, particularly in Karachi.

PSO directed to order three shipments for power sector

A senior official at the petroleum division said the PSO had been asked to import three furnace oil shipments that it had put on hold when the cabinet committee on energy (CCE) placed a ban on furnace oil imports on Oct 27, 2017.

Describing the fresh imports as ‘one-off’, the official said the PSO has been asked not to entertain any direct import orders from the power companies or the power division and route their request through the petroleum division for formal approval from the cabinet committee on energy.

Even after the CCE approval, PSO would have to make import arrangements through its 60-day cycle and that too after optimal utilisation of local refinery production.

He said the K-Electric had requested PSO for some fuel imports as its stocks at Bin Qasim plant dropped below single-day consumption but was told that the CCE had imposed a ban on furnace oil import and hence it should seek government approval for fresh imports.

The power division suggested that local stocks should be supplied to the KE but PSO warned that in case of a diversion of local stocks it would not be possible to meet Hub Power Project’s requirements. Besides KE, some Punjab-based power plants also required some stocks for backup.

Even though total furnace oil stocks currently stood around 360,000 tonnes, these were spread almost across the country and almost 8000 Megawatts (out of total 9500MW) worth of furnace oil-based plants currently did not have stocks even for one day.

The official lamented that PSO’s receivables had gone past all previous records and non-recovery of around Rs334bn was putting a question mark on its financial management. He said the government had refused to provide any cash injection to the PSO at this stage in view of fiscal deficit limits.

He said the government has been indirectly helping PSO through foreign exchange arrangements under Foreign Exchange-25 Scheme and even that credit limit worth $600 million had already been exhausted. “This needs to be increased by the government”, he said.

Officials said the Rs334bn receivables of PSO included Rs285bn from the power sector including Hubco’s Rs86bn and Kapco’s Rs43bn.

On top of that, a fresh stream of circular debt was now flowing from the Sui Northern Gas Pipelines Ltd (SNGPL) on account of Liquefied Natural Gas besides Pakistan International Airlines’ chronic defaults worth Rs16bn.

Officials said the SNGPL was facing difficulties in recovering LNG-related dues after the LNG-based plants struggled consuming its import quantities, resulting in its diversion to other consumers having longer billing cycle.

Total payables of PSO currently stood at Rs84bn including almost Rs70bn to foreign suppliers and about Rs15bn to local refineries.

The PM office had ordered the power and petroleum divisions on Oct 27 to shut down furnace oil-based plants even though the power sector authorities had placed import orders on Oct 25. As a result, the furnace oil storages were topped up, affecting production of other petroleum products and the challenge was gradually resolved through increase of some stocks by power plants.

Most of the stocks were consumed during canal closure period between Dec 25 and Jan 31 and minimal hydropower availability.

Published in Dawn, February 17th, 2018

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