Ministry directs PSO to purchase Furnace Oil from local refineries

DG Petroleum Division held a meeting through a Video conference on the Furnace oil demand and supply situation for the power sector

ISLAMABAD: Instead of importing the Furnace Oil from abroad, the Ministry of Petroleum has directed the Pakistan State Oil (PSO) to get it from local refineries and sold to the local power sector.

The PSO has asked for the permission from petroleum ministry to import the Furnace Oil for local power sector, which the government denied. “The government advised PSO to lift the Furnace Oil produced from the local refineries,” the source added.

Director-General Oil (DG) Petroleum Division held a meeting through a Video conference on the Furnace oil demand and supply situation for the power sector. The meeting was called by the Director General (oil) to discuss the demand and supply situation of RLNG/FO.

Given reduced availability of RLNG for power generation during December 2020 and January 2021 and a low inventory of furnace oif at GENCOS/IPPs, NPCC tabled their revised demand of furnace oil for the corresponding periods.

Officials informed that as regard LSFO demand, PSO was advised to import 2 x 50,000 MTs of LSFO during the meeting based on ARL’s firm commitment for supplying 20,000 MTs LSFO to PSO every month, i.e., November, December 2020, and January 2021.

The PSO representative informed they had reviewed the demand placed by NPCC, and PSO was required to supply around 224,000 MTs to GENCOs/IPPS as NEL, Saba Power, and Atlas Power are not procuring furnace oil from PSO.

The refineries had also opposed the import of furnace oil by PSO and other refineries.

The PARCO’s representative informed that they are carrying a huge inventory of furnace oil resulting in refinery throughput. Therefore he requested the chair to direct PSO to uplift furnace oil from PARCO. PSO informed that they could not uplift products due to the non-availability of a purchase order from their customers.

However, Hubco is lifting 10,000 MTs from PARCO.

They contacted Chief Finance Officer, CPPA to shift PARCO’s produced furnace oil to TPS Muzzafargarh/Lalpir Power/Pakgen Power. He informed that they had released payment to Lalpir and Pakgen Powers to procure furnace oil from PSO.

However, he highlighted that IPPs are reluctant to place purchase orders due to the price differential between imported furnace oil and refineries’ produced furnace oil. Director General (Oil) clarified that as per standing instruction of the Federal Government, government binds OMCs to consume refineries’ produced finished products before import plan. He said that OMCs can import only deficit volumes.

Besides the above, refineries offered that they can allocate the maximum product to PSO.

As furnace oil is a deregulated product, refineries may take appropriate measures to resolve price differential issues between locally produced furnace oil and imported ones. To ensure the refineries’ smooth operations, DG Oil advised PSO to account for Locally produced furnace oil before finalizing the import.

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