The energy management of the incumbents is principally right; but there is something missing in the short to medium term consequences of actions. The case in hand to not generate power on furnace oil (FO) in days of excess supply as the new plants on RLNG, coal and nuclear and commissioned, and the government decided rightly so, to not use FO as a fuel option which is expensive and environmentally unfriendly.
However, unfortunately the decision appears whimsical. The country’s consumption of FO last year was 9.6 million tons out of which 2.9 million tons were produced by domestic refineries.
With an addition of 4000MW from non-FO generation since June16, FO is a dispensable option, this winter. Since, the country is importing excess RLNG, some of the old plants are running on gas as well, such as KAPCO. Now with the second RLNG handling terminal coming online, part of FO would even become redundant post winters.
That is good. What is wrong in it? What is the fear? Well, the problem is lack of coordination, as PSO has already imported FO with some of the shipment in storage with no demand and perhaps some is on the way. The storage capacity of FO at OMCs is 0.6 million tons while adding the capacity of refineries and IPPs, total FO storage of the country stands at 1.94 million tons.
Once that storage is filled, the local refineries may have to stop producing FO. But the catch is that refineries process crude to produce all the six products simultaneously including FO, petrol, diesel, jet oil etc. And if they can’t sell or store FO, they would simply not refine any crude.
Thus, the refineries may halt production soon. The consumption of petrol is around 6.46 million tons, out of which 1.6 million tons are produced at home. In case of diesel, 56 percent of consumption (7.8 mn tons) is produced from local refineries.
With refineries closing down, the ever increasing consumption of petrol and diesel will fall on imported finished products. That will not only hurt domestic production and results in higher import bill, but also the bigger problem is the limited port handling capacity of petrol and diesel.
Every petroleum product is different and requires varying port handling and storage capacities. The problem is our energy pundits did not think through the externalities of closing down FO plants on petrol and diesel. There is a fare chance that, in absence of domestic production, petrol and diesel supply will choke. And there may be a case of these products shortage soon.
And what, if Attock Refinery closes down as it relies totally on domestic crude. What will we do with the crude oil supply coming from OGDC and PPL? This may turn out to be a total fiasco. The domestic crude will not be used; domestic refineries would be closed, and imported petrol and diesel handling would be choked.
Does anyone in the government or PSO have an answer to this looming threat? How would the day to day economic and social activities take place if we don’t have fuel for transportation? What is the economic cost of closing down refineries and importing more finished products?
These are the issues of short to medium term. Now let’s come to long term consequences. How will refineries cope up when the FO demand completely evaporates? Do we have any policy of exporting FO?
It’s not a theoretical issue; it is a real threat in the making. And if the Attock refinery shuts, the associated fields will not produce gas in addition to oil. There is no solution to the mess in the short to medium as on merit, we cannot run FO based plants Check and mate? Or is it?
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