Furnace oil consumption

All of Pakistan's refineries could be forced to shut down if the problems related to the slow off-take of furnace fuel oil are not resolved on an urgent basis. The government's increasing focus on using gas for power production has pushed Pakistan's oil refining sector into a corner. The growing levels of leftover inventory of the fuel can break down the company's supply chain network, forcing it to halt operations. This could have serious ramifications not only for the refiners but for the entire country as well.
The current and the previous governments have increased imports of regasified liquefied natural gas, or RLNG, which is used by LNG power plants for electricity generation, while cutting back on the furnace oil purchases. This strategy was aimed at reducing Pakistan's oil import bill, considering that RLNG is cheaper than furnace oil. But the plan could backfire if it ends up damaging the country's energy industry.
Oil refiners have proposed that the government should facilitate the utilisation of furnace oil by making at least 10,000 metric tonnes per day of the fuel's consumption mandatory for electricity generation. This will ensure smooth operations of the refineries in the country, such as Byco Petroleum, Attock Refinery Limited, National Refinery Limited, Pak Arab Refinery and Pakistan Refinery Limited.
Furnace oil consumption has remained weak lately. In the first three weeks of November, just 3.285 metric tonnes per day of furnace oil was sold by oil marketing companies in the country. That is substantially lower than what has recommended by OCAC. In this backdrop, refiners have already reduced their throughput and are currently running at their lowest capacity levels as the furnace oil inventory levels remain high across the board. If the consumption of furnace oil from power plants does not immediately improve to higher levels, then it could damage Pakistan's petroleum supply chain network, forcing the refineries to shut down.
Oil refineries' closure could send ripples throughout the industry. Pakistan's refiners play a critical role in ensuring the country's national logistics and security infrastructure. A shutdown of Pakistan's refineries could cause a nationwide shortage of motor gasoline and other petroleum products. The ensuing chain reaction could crash the supply chain networks of a number of other industries.
Fayaz Ahmad Khan, Senior General Manager Byco added: "Byco faces an imminent shutdown due to the non-upliftment of furnace oil from our refinery. The situation for Byco is even worse than for the other refineries and immediate off-take of furnace oil is the only way we can avert the major crisis of a forced shutting down all of Pakistan's refineries."
To resolve this situation, the government should devise a plan which results in the immediate upliftment of furnace oil by the oil marketing companies, to avoid a fuel crisis which could bring down Pakistan's civil aviation, air force, and cause a nationwide logistics and transport crisis.
(The writer is a capital markets expert and a business and finance commentator)
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