Pakistan Faces Furnace Oil Glut – OpEd
Pakistan faces furnace oil (FO) glut of 632,000 tons following refusal of power plants to stockpile the fuel and poor export feasibility due to its low price in the global market.
The FO stocks have been accumulating since the start of last winter when power demand shrunk. Power plants are still not lifting furnace oil as electricity generation is mainly coming from hydel and nuclear sources, which have cut the demand of fuel oil for power generation.
The attempts by refineries to export furnace oil did not prove lucrative because of low price. Refineries determined it was financially unviable to export FO, as it could eat up their profits if the fuel was exported in the international market at a low price.
According to the sources in the oil sector, total 632,000 FO stocks include 539,080 tons of useable stocks and 93,147 tons of dead stocks.
Pakistan’s oil marketing companies (OMCS) currently hold 203,879 tons of furnace oil stocks, which is 32% of total stocks. The country’s power sector holds 202,280 tons of the fuel oil stocks with it, which is 33%, while local refineries have 220,068 tons, which is 35% of the total stocks.
The breakup of FO with the local refineries shows that PARCO holds 116,004 tons, National Refinery Limited has 32,327 tons and Pakistan Refinery 44,455 tons, Attock Refinery 16,826 tons, and Cnergyico has 10,457 tons of FO stocks.
The present FO stock is huge and is making the operations of local refineries vulnerable because it has been interrupting their operational capacity. They said that if the FO stocks were not lifting, it could further lead towards a shutdown of refineries’ operations.
On exporting the FO, industry people said that PARCO exported 60,000 tons and PRL exported 25,000 tons but the export price was not lucrative. The price in the global market is on the lower side and it can cause financial issues for the refineries if the stocks are exported at this price.
The situation is not attractive for the local refineries as power generation from FO in the month of February slumped by 80% compared to the same month of last year and in the first eight months of the current fiscal. Electricity production from FO also decreased by 50% compared to the same period of the last financial year.