ISLAMABAD: The country’s oil refineries have warned the government of a looming shutdown of their operations in a couple of weeks due to high and yet rising stocks of furnace oil.

Informed sources said the refineries have reported to the government that the oil industry was currently holding about 400,000 tonnes of furnace oil. In addition, 300,000-tonne stocks were lying unutilised at various power plants.

On the other hand, the Power Division had placed a requirement of furnace oil for February at just 45,000 tonnes for the power sector. The sources said the Petroleum Division had advised the Pak-Arab Refinery (Parco) at Multan to export one cargo of about 50,000 tonnes of furnace oil during the current month.

Call for an urgent meeting to firm up furnace oil demand

The Parco has, however, told the government on Thursday that it had serious concerns over the low demand projected by the power sector and in the absence of a significant upward revision in demand there will be a high risk of closure of refineries in February.

It said the total monthly furnace oil production of the refineries was more than 200,000 tonnes. This is on top of about 700,000 tonnes currently in stocks of refineries, marketing companies and power plants.

The refineries have called for an immediate need to address the critical issue of high furnace oil stock levels and low offtake which had negatively affected the ability of the refineries to operate at their full capacity.

The refineries have demanded an urgent high-level meeting on the issue to work out a firm demand for furnace oil for February to enable the industry to plan refinery operations.

At least three refineries recently faced shutdowns and others had to go for production cuts due to high furnace oil stocks and they offered discounted prices for better off-take by the power sector. As a result, Cnergyico (formerly Byco) reduced its stocks through discounted price while National Refinery had extended its ongoing shutdown.

Parco was operating at 75pc capacity and was in the process of exporting about 50,000 tonnes of the furnace oil through an international tender that may materialise by end of the current month. Despite canal closure, the furnance oil consumption by power plants has not increased and continues to utilise about 5,000 tonnes per day instead of normal consumption of about 12,000-16,000 tonnes during these days.

On the other hand, the three RLNG-based power plants in Punjab – Bhikki, Balloki and Haveli Bahadur Shah – were operating at high-speed diesel at the rate of about 5,000-6,000 tonnes per day because of RLNG shortages. Interestingly, the price of HSD is about Rs145 per litre against about Rs85-95 per litre of furnace oil.

Published in Dawn, January 21st, 2022