Oil Companies issue warning regarding increasing furnace oil stockpiles

November 27, 2018: Pakistan oil refineries have sent a SOS to the Ministry of Energy stating that the throughput has reached 60% to 70% because their tanks have topped up with furnace oil with no ullage, which can result in supply chain of petroleum products being derailed.

Oil Companies Advisory Council comprising of Pak Arab Refinery, Attock Refinery, National Refinery and Pakistan Refinery sent separate letters to Ministry of Energy giving warning that the government should take a holistic view of the whole situation as continuous pile up of the furnace oil will break down the refining of other petroleum products resulting in shortage across the country.

From November 1 to November 21, only around 69,000 metric tons or 3,285 metric tons per day of furnace have been sold by the oil marketing companies as such all refineries have already slowed down and are generally operating at their lowest levels and are heading towards imminent shutdown, the letter of Oil Companies Advisory Council said.

The industry/refineries have already proposed a general guideline that a minimum of 10,000 metric tons or 300,000 metric tons per month of furnace oil should be made mandatory part of energy mix for power/electricity generation to take care of local refineries production uniformly throughout the year, irrespective of seasonality.

 “Refinery closure at this stage will have serious ramifications”, Pak Arab Refinery said in the letter. “It will break the product supply chain, resulting in serious shortage of products in the country, with immediate dry outs of motor gasoline, JP-1 and JP-8 supplies to Pakistan Airforce and disruption in local crude disposal,” the letter further added.

PARCO produces around 160,000 metric tons of diesel, 75,000 metric tons of motor gasoline and about 30,000 metric tons of Jet fuel for PIA and Pakistan Airforce. In case of shut down, these quantities are impossible to be imported in time, keeping in view their delivery periods and limitations at the ports, the letter said.

Pakistan Refinery is operating at bare minimum capacity, so if the situation so persists, it will have no other option but to shut down in the next 10-15 days. The closure will not only affect the supply of petroleum products but will also hamper crude oil/condensate receipts from different fields.

According to an oil analyst, in October, the industry imported around 146,393 tons of furnace oil and another 68,153 tons cargo arrived on 18th November, “it's beyond comprehension why furnace oil was imported when even local refineries were finding it hard to sell local production”, he said.

 “We should not only be looking at the marginal higher cost of furnace oil as compared with LNG, we should be looking at the horrendous cost of the dry out and the inevitable civil commotion that will follow in the country,” Pak Arab Refinery said in the letter.

Posted on: 2018-11-27T12:21:00+05:00