The federal government decided on Wednesday to impose ban on the import of furnace oil to encourage consumption of local production. The decision has been taken in a meeting of Cabinet Committee on Energy (CCoE) held under its Chairman Ghulam Sarwar Khan, Federal Minister for Petroleum and Natural Resources.
The committee decided to set up a taskforce to address the various concerns of local refineries. Babar Nadeem will chair the taskforce which will make recommendations on issues being faced by oil refineries. "The taskforce will present its recommendations in the next meeting of CCoE," an official of Petroleum Division said.
At present, all the refineries are facing tough time as their furnace oil inventories are accumulated. In meetings with officials Petroleum Division, representatives of local refineries said that if the present situation persists, they may shut down their business.
According to Oil Companies Advisory Council (OCAC), local refineries produced furnace oil of one million metric tonnes during the first four months (July-October 2018) and it was still being imported for consumption in power plants. Domestic refineries are daily producing 10,000 tonnes of furnace oil.
Earlier, this issue had been taken up by the Economic Coordination Committee (ECC) held on November 27 which forwarded it to the CCoE.
The government can opt for one of the two options: it may ask refineries to boost furnace oil production or permit these refineries to export surplus furnace oil. Pakistan State Oil (PSO) either owes Rs 270 billion to power powers for the supply of furnace oil. On April 14, 2018, Pakistan Muslim League-N government lifted the ban on import of furnace oil for power generation.
The CCoE decided that oil refineries should find export avenues for themselves. However, sources in energy sector said that the government has no policy or mechanism under which it allows export of surplus locally produced furnace oil.
The committee decided that for short-term, oil refineries will work at their optional level. Power sector can aid them in storage for next three months on credit. But oil refineries need to upgrade themselves.
The committee has further decided that merit order of power plants will not be disturbed so that consumer can be provided with economical electricity. A standard operating procedure (SOP) will be devised on criteria of demand of Power Division and supply (of RLNG) to Sui Northern Gas Pipelines Limited (SNGPL). This SOP will be discussed in the CCoE and ratified through the cabinet.
On November 17, 2018, in its periodic report submitted in the Upper House, the
Senate Standing Committee on Petroleum directed the Petroleum Division to carry out cost analysis of power production through imported LNG and through furnace oil by a modern and latest power plant.
An energy expert said that the cost of electricity produced through furnace oil is estimated at Rs 12 per unit whereas LNG-based electricity costs Rs 9 per unit.
The CCoE decided that LPG price will not be increased as it is the fuel of underprivileged class.
The meeting was also attended by Sh Rasheed Ahmad, Federal Minister for Railways, Asad Umar, Federal Minister for Finance, Umar Ayub Khan, Federal Minister for Power, Khusroo Bakhtiar, Federal Minister for Planning, and Abdul Razzaq Daud, Advisor to Prime Minister for Commerce, Textile, Industries, Production and Investment.
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