KARACHI: Attock Refinery Ltd said on Tuesday it’s temporarily shutting down one of its main processing units for eight days owing to “ullage constraints” arising out of low demand for furnace oil.

Ullage refers to the empty space in a refinery’s storage tanks. In other words, buyers of furnace oil aren’t lifting the product from the refinery, which has forced the crude oil processor to halt operations for the time being.

As a result, the refinery will operate at a capacity of 35 per cent. Adequate inventories of different products, however, will remain available to meet any immediate requirement, the company said.

Speaking to Dawn on Tuesday, a veteran of the refining industry said the situation is a direct outcome of furnace oil–based independent power producers (IPPs) not being despatched by the country’s sole electricity purchaser.

The national power buyer asks all kinds of IPPs to generate electricity based on the so-called merit order, which ranks these firms in the ascending order of price per unit.

“The same thing happened last year when all refineries were left with huge stocks of furnace oil,” he said while blaming the government for leaving the five refineries high and dry every year.

IPPs aren’t lifting fuel for generation as electricity demand squeezes in winter

Consumption of electricity goes down sharply every winter. It means the production capacities of IPPs that run on comparatively cheaper fuels — hydel, nuclear, coal and gas — don’t get fully exhausted. That leads to the furnace oil–based IPPs further slipping on the national merit order and seldom getting despatched around this time of year.

As for the refineries, cutting out furnace oil from the electricity generation mix poses an existential threat. Furnace oil is one of the many products they obtain by processing crude oil.

Scaling back production leads the refineries to produce smaller quantities of petrol, diesel and jet fuels for domestic supplies. As an inadvertent consequence of this policy, the country’s dependence on imported retail fuel increases, and so does the outflow of foreign exchange.

“The government should make it mandatory for the national power purchaser to buy at least 1,500 megawatts produced on furnace oil to ensure that the refineries stay operational,” said the veteran requesting anonymity.

The optimum throughput of furnace oil for all refineries is about three million tonnes a year. It translates to the average production of 8,000-9,000 tonnes a day after accounting for all variables.

Burning about five tonnes of furnace oil produces one megawatt of electricity. It means the local production of 8,000 tonnes of furnace oil should be sufficient for generating 1,500-1,600MW a day, he said.

In the first four months of 2022-23, the share of furnace oil–based electricity in the national power mix was only 6.1pc as opposed to hydel (34.5pc), nuclear (16.1pc), imported gas (16.1pc), coal (13.7pc) and local gas (10.2pc), according to data released by the National Electric Power Regulatory Authority.

Published in Dawn, December 14th, 2022