Fuel oil stocks amount to 145,000 tonnes; PPIs limit purchases

KARACHI: The overabundance of fuel oil in the domestic market is now 145,000 tonnes; with independent power producers (IPPs) continuing to exercise restraint in purchasing shares held by refineries, the latest figures available with The News showed Thursday.

Of the five refineries whose stocks of heating oil are piling up, three have decided to suspend their operations for a certain period of time. IPPs have not purchased fuel oil for power generation in recent weeks, creating operational and storage constraints for refineries, with some compromising to sell at lower rates.

Although some purchases have been observed in recent days on part of the PPIs, the quantity was not sufficient to dispose of the huge stocks held by the refineries.

The latest heating oil usage figures on Wednesday showed PPIs only burned 4,823 tonnes for power generation. Of this total, 2,200 tonnes was Low Sulfur Heating Oil (LSFO), which was produced only by

Attock Refinery Limited (ARL) in Pakistan. All other refineries produce high sulfur fuel oil (HSFO). Currently 6,000-7,000 tonnes of HSFO is produced by four refineries other than ARL.

Sources in the petroleum industry said, “LSFO is being removed from ARL, but HFSO from other refineries is not.”

They said this was done “out of an obligation to keep the ARL operational” because it uses locally produced crude oil, “which, if not used, will have a negative impact on gas production.”

This arrangement, according to the sources, was an integral part of the current energy crises affecting the domestic and industrial sectors which were suffering the brunt of the gas shortage in the country.

The fuel oil glut was created due to poor planning by the government, which also imported fuel oil for power generation in the winter when power generation from gas declines dramatically.

According to the data, Pak-Arab Refinery Limited (PARCO) has 88,000 tonnes, National Refinery Limited (NRL) has 28,300 tonnes, Pakistan Refinery Limited (PRL) has 16,000 tonnes, Cnergyico PK Ltd 11,000 tonnes and ARL has 3,000 tons of oven oil.

A few days ago, PARCO launched a tender for the sale of its HSFO, which the company was storing in Port Qasim for export. PARCO received an offer of Rs72,000 / tonne for HSFO against its ex-refinery price of Rs86,000 / tonne.

Steve R. Hansen