Petroleum Crisis Expected as Pakistan’s Oldest Refinery Threatens to Shutdown

Attock Refinery Limited (ARL), Pakistan’s oldest petroleum refining company, has announced to cut down its kerosene production significantly and shut down its refining units gradually due to surplus reserves.

ARL has resorted to this strategy as a protest over rising furnace oil imports by the Independent Power Producers (IPPs) and Oil Marketing Companies (OMCs) instead of them procuring from the local refineries, sparking fears of severe petrol, high-speed diesel, and jet fuel shortage in the coming days.

In an official letter to the Petroleum Division, Ministry of Energy, Chief Executive Officer (CEO), Adil Khattak, said that procurement of light and high sulfur furnace oil (LSFO/HSFO) by the OMCs from ARL hasn’t improved despite repeated warnings over the last two weeks. As a result, the reserves of furnace oil in the ARL have increased drastically and the refinery has only 8-10 days of storage capacity left.

With no increase in Furnace Fuel Oil (FFO) procurement, ARL is left with no other option but to cut down its kerosene production. In case the situation doesn’t change in the next few days, ARL will be forced to shut down its distillation units one by one, leading to the complete closure of the refinery ultimately.

While IPPs are continuously importing furnace oil to fulfill their needs, they aren’t procuring furnace oil from local refineries despite being legally bound to maintain FFO inventory for 30 days. Moreover, regulatory authorities have also failed to compel IPPs to procure furnace oil from local refineries.

On the other hand, at a time when most oil refineries were considering complete shutdown due to low storage capacity, Petroleum Division had asked local refineries on 30 November to ramp up production of kerosene oil, with it claiming that the country had just 10 days of reserves left.

The directives of the Petroleum Division highlighted the glaring disconnection between different government departments as well as the lack of planning in each department.

ARL recommended the Petroleum Division to urgently intervene in this matter and order Pakistan State Oil (PSO), IPPs, and OMCs to restore procurement of furnace oil from local refineries to previous levels in an attempt to ensure their optimum output and prevent them from a complete shutdown.