Mull oil export refineries


Oil refineries sent an SOS message to the government, asking it to take steps to purchase High Sulfur Fuel Oil (HSFO) to protect the country’s strategic assets as power plants ceased supplying in fuel oil.

At the same time, the refineries are considering exporting fuel oil for which the initial process has started.

According to sources, Independent Power Producers (IPP) are keeping HSFO stocks under 30 days requirement and the storage capacity of all power plants is currently underutilized.

In the SOS, refineries warned the federal government that they were heading for a forced shutdown, which would also impact the supply of motor alcohol (gasoline), high-speed diesel and jet fuel to consumers.

“The situation of local refineries requires immediate action from the Ministry of Energy to compensate and accommodate, allowing the refineries to ensure the continuity of the refinery. We reiterate that as long as PPIs do not increase the combustion / consumption of HSFO, there is no way to maintain the operations of the refinery, ”said a letter sent by a refinery to the general manager (petroleum) of the petroleum division.

However, much to the chagrin of refineries, the export option is clearly not viable for some reasons such as port congestion, negligible demand for HSFO in the international market and financial losses caused by high stocks in the markets. storages.

“The refineries put out an HSFO export tender last week and have yet to receive any viable bids,” the refinery said in the letter.

According to sources, PPIs are required to hold inventory in accordance with the fuel supply agreement, which is part of the Power Purchase Agreement (PPA).

In accordance with the PPA amendments signed with the fuel oil plants and other PPIs in February 2021, the power plants agreed to replenish their fuel stocks (for 20 to 30 days) in accordance with their original PPAs.

Previously, in a letter sent to the oil division on November 22, Pakistan State Oil (PSO) also highlighted the refusal of PPIs to source fuel oil despite a firm commitment.

PSO also wrote a letter on the same subject on November 11.

“It is noted with concern that the actual purchase by PPIs / Gencos since July 2021 is significantly lower than demand from the Energy Ministry and / or customers, resulting in a build-up of inventory,” the letter said.

As a result, PSO stocks peaked at around 136,000 tonnes, the oil marketing company said.

Posted in The Express Tribune, December 1st, 2021.

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