ISLAMABAD: The government has directed domestic refineries to use billions of rupees being collected in shape of yearly ‘deemed duty’ for the upgradation of their refining facilities.
Additionally, it has also notified an immediate ban on import of furnace oil and ordered local refineries to decrease the production of furnace oil (FO) to a bare minimum, reports Dawn.
According to a notification issued by the Ministry of Energy (MoE), the government has directed refineries to sign commercial agreements with power producers for using their capacity for furnace oil storage.
MoE directed in future all refineries ensure furnace oil production is a minimal byproduct of crude oil processing.
It stated the oil refineries handle production of additional storage facilities and use the collected proceeds from ‘deemed duty’ for the modernization and improvement of their facilities.
The domestic refineries product around 30% furnace oil of their overall capacity utilization. In the past few years, to facilitate liquefied natural gas (LNG) imports for cheaper electricity production, the government has been planning to phase out furnace oil.
Additionally, the notification said an immediate ban on import of furnace oil has been enforced starting 2nd January except for K-Electric.
The previous PML-N administration in October 2017 had imposed a fan on import and usage of furnace oil in electricity production, however, later it gave an exemption for three months to meet peak summer electricity demand.
According to a senior government official, the notification was issued on the directives of the Cabinet Committee on Energy (CCoE) presided over by the Petroleum Minister Ghulam Sarwar Khan.
The official said the coastal refineries had been persuaded to export their furnace oil production.
Already Byco Refinery had commenced furnace oil export with its first consignment being sent last week, the official added.
Additionally, Pakistan Refinery, National Refinery and Enar Refinery are going to commence export of their product for the time being until a deep conversion refinery near Khalifa Point is established by Parco.
In December 2018, the refineries were directed to export around 90,000 tons of furnace oil and shift 60,000 tons to storages of power plants to empty refinery storage tanks as a short-term measure.
This happened after it was told that cumulative oil storage capacity of all oil refineries stood at 164,000 tons, whilst total stocks had surpassed 150,000 tons.
Consequently, the refineries were compelled to decrease capacity utilization to circumvent supply chain disruption of petroleum products including scarcity of refined products to defence and aviation, especially jet fuel.
