Local refineries have approached the Senate Standing Committee on Petroleum in a bid to avert the furnace fuel oil (FFO) crisis looming in the country after the government as a policy decision refused to lift the FFO for power sector.
The Senate Standing Committee on Petroleum met under chairman Mohsin Aziz on Monday to discuss problems currently being faced by the oil refineries to carry on production as the refineries are about to halt their production.
Adil Khattak, Chief Executive Officer (CEO) Attock Refinery Limited, said that Petroleum Division has showed its least concern over resolving the issues of local refineries. Special Assistant to Prime Minister on Petroleum Nadeem Babar had constituted a working committee comprising the government officials and representatives of refineries to find out a solution. The objective of the working group is to study and analyze the country's current pricing mechanism and existing configuration of refineries, and recommend a pricing structure, incentives and policy measures to enable sustainable refining operations in pre up-gradation period, and also to enable investments in the existing refineries for up-gradation of furnace oil to value added products and up-gradation of product specifications to Euro IV/V.
"Nadeem Babar assured the local refineries on December 9, 2019 that the working committee will find a solution of the problem faced by local refineries in meetings which would be held daily but not a single meeting of the working committee was held," he informed the committee.
He said reduced lifting of furnace fuel oil (FFO) from refineries due to shutdown of FFO fuelled power plants is forcing refineries to run at lower throughput. "Refineries are losing around Rs 35 to Rs 80 million per day to low FFO prices making their operation unsustainable," he claimed.
He maintained that the refineries could not export FFO as drastic reduction in FFO price was recorded in International Maritime Organization (IMO) 2020 regulation mandating use of low sulfur fuel in ships.
The secretary petroleum said that as a result of impending IMO 2020 sulphur content of FFO was restricted to 0.5 percent wt. Local refineries are producing 3.5 percent wt. Suplhur FFO are suffering huge losses on daily basis due to drastic reduction in FFO prices in international markets.
Adil Khattak revealed that last year refineries faced heavy financial losses. ARL faced Rs 6.5 billion, NRL Rs 8.7 billion, PRL Rs 5.8 billion and Byco encountered loss of around Rs 1.7 billion mainly due to devaluation of Pak rupee.
He said that the downstream petroleum policy covering refineries and oil marketing companies (OMCs) was last issued in 1997. There is dire need for a new downstream policy catering for short-, medium- and long-term requirements of the country.
Hr further said that the refineries proposed the Petroleum Division to have a separate merit order for fuel oil run efficient power plants about 2,000MW and load be given as per their efficiency so that 7,000 to 9,000 MT per day of local FFO production is consumed for the interim period.
He said the present financial health of local refineries would also have negative impact on foreign investments in refinery sector.
The committee was informed that the indigenous and imported crude is refined by six major and two small oil refineries in the country having 19.37 MTPA refining capacity. Except PARCO which is semi-conversion refinery, all other refineries are hydro skimming therefore these are struggling with efficiency issues.
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