Staff Report
ISLAMABAD:
Local oil refineries have asked the petroleum division to take measures for lifting of the High Sulphur Furnace Oil (HSFO) from the refineries to safeguard the strategic assets of the country.
According to sources, following the agreement between the government and Independent Power Producers (IPPs), payables of the IPPs are being cleared through installments despite the fact that they (IPPs) have not been maintaining HSFO stocks of 20-30 days in violation of their agreement with the government. So far, they (IPPs) have received two installments, said sources.
The sources said that now the local refineries have warned federal government through issuing SOS call for lifting of the HSFO from the refineries. The refineries informed that they (refineries) are heading towards a forced refinery shutdown which will also impact MS (motor spirit), HSD (high speed diesel) and Jet fuel availability to the customers.
IPPs are bound to stock 30 days of HSFO and all power plants storage is currently under utilized which in evidently is severely affecting all local refineries, said sources.
Sources also said that the refineries have deeply analyzed the market situation and approached every customer to lift HSFO before approaching Director General (Oil), Ministry of Energy (Petroleum Division) and inform him about availability of high stocks of HSFO by refineries. However, refineries informed DG Oil, Petroleum Division that all of the customers have refused to lift the HSFO due to non-burning/con-consumption by IPPs.
“All in all, the situation of local refineries requires an immediate action from Ministry of Energy to compensate and accommodate enabling the refineries to ensure refinery continuity. We reiterate that until and unless IPPs increase HSFO burning/consumption, there is no way to keep up the refinery operations,” said letter of a local refinery to DG (Oil), Petroleum Division.
Sources further informed that local refineries have been considering export option for which initial process has begun. However, to the dismay of refineries, the export option is clearly not viable due to certain major reasons including port congestion issues at KPT and FOTCO which is a unanimous concern poof the local industry, negligible demand of HSFO in international market and huge financial losses in order to carry out above 30 KT HSFO stocks in the storage of refineries for over a month as their laycan is 25-27 December, 2021.
“Refineries have floated HSFO export tender last week and yet not received any workable offer,” said a refinery in a letter to DG Oil, Petroleum Division.
Sources said that IPPs are not holding stocks as per the Fuel Supply Agreement, which is an integral part of the Power Purchase Agreement, on which they are enjoying 15% IRR on equity and 70% take or pay on capacity. However, refineries have urged from the energy ministry that it (MoE) should ensure that they use the proceeds to replenish their HSFO stock as a matter of priority and per their contractual commitment.
As per the master/PPA Amendment agreements signed with various oil-fired and other IPPs in February 2021, the IPPs contractually agreed to replenish their fuel stock as per their original PPAs (20-30 day stock). Since the first 40% installment of the IPPs’ outstanding dues (e.g. Hubco, KAPCO, Lal Pir / Pak Gen) already paid, and the remaining 60% due to be paid first week December, Similarly, the IPPs have received 2nd tranche of Rs 134 billion as well.
Meanwhile, Pakistan State Oil (PSO), in a letter to DG (Oil), Petroleum Division, has also pointed out that actual upliftment by IPPs/Gencos since July 2021 is significantly short which has resulted in accumulation of stock inventory of PSO.
“ You are requested to kindly take up the matter with MoE (Power Division) to advise the power plants to uplift product for stock build up as the current stock with these IPPs/Gencos especially HUBCO, TPS Muzaffargarh and TPS Jamshoro are negligible and these power plants should maintain at least 21-30 days’ stock in order to avoid any untoward situation,” said a letter of PSO.
