KARACHI/LAHORE: The Pakistan Refinery Ltd (PRL) temporarily shut down its production on Thursday because of operational and ullage constraints, according to a regulatory filing with the Pakistan Stock Exchange.

The refinery will stay shut “until the situation improves”, said the notice by PRL, which is one of the five refineries operating in the country.

A senior PRL executive told Dawn the company was forced to shut down operations after it ran out of storage capacity. The situation arose after the refusal to lift fuel by independent power producers (IPPs) that also have storage for emergency use.

“Since the power sector is not lifting refined fuel oil from the local refineries, almost all of them are facing storage constraints and shutting down further production gradually. Rented storages have massive costs. So no one is interested in that, except one company that plans to export fuel oil,” he said on condition of anonymity.

The source claimed the Power Division had made a mess of things with the Pakistan State Oil (PSO) having imported refined oil in large quantities at the expense of the local refineries. “The IPPs say they don’t have the money to pay PSO because of non-payment of their arrears. Hence, the PSO was reluctant to supply oil to them,” he added.

He went on to predict that all refineries would shut down in 15 days if the issue wasn’t resolved immediately.

In a letter the Oil Companies Advisory Council wrote earlier this month, the representative body of the downstream oil industry warned the Petroleum Division of a shortage of petroleum products if the refineries were forced to reduce their crude oil processing owing to the failure of generation companies (Gencos) and IPPs to lift the processed fuel.

Oil marketing companies (OMCs) consume refinery-produced finished products before importing the deficit volumes. But Gencos and IPPs didn’t lift the committed quantities, resulting in stock build-up at storage facilities of OMCs.

“All the storages of power plants are empty and IPPs are maintaining two to three days of stock in storages. On the other hand, refineries are planning to export fuel oil at a great financial loss,” it said.

The fact that the local refineries are operating at a low capacity while refined products are being imported is resulting in a significant loss of foreign exchange. The oil import bill, particularly of refined petroleum products, constituted the largest chunk of about 83 per cent increase in imports during the first five months (July-November) of the current fiscal year.

The five refineries could together produce about 274,000 tonnes of petrol per month with optimum capacity utilisation. However, they were producing about 170,000 tonnes a month, which is almost 60pc lower than their combined capacity.

Similarly, the local refineries are producing 330,000 tonnes of high-speed diesel (HSD) every month, which is about 48pc lower than their total monthly capacity of about 490,000 tonnes. According to the refinery data shared with the government, PRL’s underproduction stood at about 30pc in both petrol and HSD.

Published in Dawn, December 17th, 2021