The Power Division has refused to lift furnace oil (FO) from local refineries without a workable deferred payment plan.
In a meeting with refinery representatives, energy ministry officials openly told all stakeholders that it would “not lift the FO for power plants which don’t come in the merit list, which is devised to go first for the cheap source of power generation”, according to a national daily.
The oil industry representatives did not agree with the suggestion as they warned that the government would face financial difficulties if they purchased crude oil on the international market.
During the meeting, refineries were asked to investigate the possibility of exporting furnace oil, but they didn’t agree to the proposal for reasons that it is a financially unviable option. They contended that without a suitable action plan for curbing supply bottlenecks in the future, the accumulation of furnace oil stocks was causing low production capacity at local refineries which could cost the government heavily in terms of foreign exchange losses.
Pertinently, the accumulation of furnace oil at local refineries like Attock Refinery Limited (ARL) has caused a problem for the local refining sector. The oil producer currently faces a more serious problem than other refineries and may have to close its doors soon if the inventory isn’t retrieved immediately.
The representatives pointed out that if refineries operate at low capacity due to the non-consumption of FO, they will have to slash diesel production. They said this would have an impact on the country’s foreign exchange position because instead of utilizing the domestic stockpile, the government would have to spend extra and import diesel to meet domestic demand.
They said the Power Division’s refusal to lift furnace oil would have an adverse effect on the economy and additional spending on diesel imports would drain even more dollars.
