CCoE may approve furnace oil import to meet energy needs this winter

ISLAMABAD: The Cabinet Committee on Energy (CCoE), in its upcoming meeting, may approve the import of furnace oil to meet the country’s energy needs in the ongoing winter season.

According to sources, the Power Division has requested the CCoE to direct the Petroleum Division make necessary arrangements for the import of 736,078MT of high sulfer furnace oil (HSFO) and 362,080MT of low sulfur fuel oil (LSFO), which would be required for Oct 2020-Jan 2021 to maintain adequate supply and strategic reserves.

Similarly, the committee was requested to direct the Finance Division to release 50pc of Tariff Differential Subsidy, budgeted for 2020-21, to the Power Division so as to enable the Central Power Purchasing Agency (CPPA) make payments for FO requirements.

“Import of HSFO and LSFO for power plants will cause a hike in electricity price and put an additional burden on power consumers, besides increasing the circular debt of the power sector,” an insider said. “The next meeting of CCoE will take an important decision whether to allow the import of furnace oil and release a subsidy or not.”

Meanwhile, the Petroleum Division directorate general, in an office memorandum dated 8th October, advocated against excess import of LSFO as it may hamper refinery operations, resulting in reduced gas availability from northern fields. “As Pakistan State Oil (PSO) requires at least 45 to 60 days for procurement, the imports during October and November 2020 will not be possible.”

However, it stated, local supplies are adequate to meet the demand for these two months.

The Petro Division pleaded that 4×65,000MT of HSFO and 2×60,000MT of LSFO may be arranged through PSO during December 2020 while blanket approval of the required quantity may be sought from the CCoE. Later, the power and petroleum secretaries may review the stock position of HSFO/LSFO at GENCOs/IPPs and refineries so as to take decisions regarding further HSFO/LSFO import requirements during January 2021 and onwards.

The Petroleum Division also requested that the Power Division may ensure that all volumes shall be utilized by GENCOs/IPPs to avoid glut of the product which may negatively impact the supply chain of petroleum products in the country.

“PSO has informed that around Rs197 billion are already outstanding from the power sector among the total outstanding receivables of Rs313 billion. Therefore, a substantial amount is required to arrange imported supplies,” the division maintained.

On 25 Sept, a meeting was held under the chairmanship of Energy Minister Omer Ayub Khan to review energy supply and demand in the national grid system. National Power Control Center (NPCC) had apprised the meeting that owing to low stock of LSFO and RFO, many power generation companies (GENCOs) and independent power producers (IPPs) have low fuel inventory while gas and RLNG supply might also be downgraded in view of increasing demand of gas in coming months.

The Petroleum Division indicated that during the winter season, excess RLNG would be diverted to the domestic gas sector and there would be an expected cut on RLNG and natural gas supply to the power sector. Additional fuel supply chain would be required to maintain power in the grid through the HSFO and LSFO fired power plants.

Ahmad Ahmadani
Ahmad Ahmadani
The author is a an investigative journalist at Profit. He can be reached at [email protected].

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