January 10, 2022 (MLN): Continuation of 1,500 MW of High Sulphur Furnace Oil (HSFO)- based power generation units would generate an annual demand of 3 million tons, and sustaining this demand for 5 years till upgrade projects are implemented would allow local refineries to operate at optimal utilization levels and consequently secure the country's fuel supply chain, Dr. Syed Nazi Abbas Zaidi, Secretary General, on behalf of Oil Companies Advisory Council (OCAC) said in a letter to Minister of Energy Hammad Azhar on Monday.
However, these solutions require significant capital expenditure and will require- 5 years to implement. During this time, the lack of Furnace Oil (FO) demand will not only put the sustainability of the refineries under serious threat but will put at risk our national fuel security, he added.
To address this short to medium-term challenge, the advisory council proposed that an appropriate share of FO in the power mix be maintained.
The refining industry is critical to the nation, serving as the backbone of an economy, as it ensures fuel supply security. The product slate of any given refinery is largely fixed based on its configuration.
All of Pakistan's refineries were configured in part to cater to significant demand for FO in the country, mainly from the power sector.
As you are aware, the share of FO in the power generation mix has been reduced significantly, which has drastically reduced FO demand, and consequently, this has created a crisis for the refining industry and all the sectors that rely on a consistent local supply of refined products including Defence.
“We acknowledge that in the long run, FO will be an even smaller part of the power generation mix as new must-run power generation capacity is added to the system. To align with this, refineries are already working on possible solutions which would significantly reduce FO production, he added.
While this proposal may not align with the Government's plan for the evolution of the power mix, it is a temporary measure and in the broader national perspective, it will have substantial benefits to the economy.
The overall impact on power generation cost would, however, be minimal as 1,500 MW is less than 10% of the average annual power demand of the country. The advisory council requested to consider the proposal in the broader national interest and the benefits it would deliver.
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