The Pakistan Refinery Ltd (PRL) has temporarily shut down operations due to operational and ullage constraints, according to a regulatory filing with the Pakistan Stock Exchange (PSX) on Thursday.
The refinery will stay shut “until the situation improves”, said the notice by PRL, which is one of the five refineries operating in the country.
As per details, although payables of Independent Power Producers (IPPs) are being cleared through installments, the IPPs are not maintaining HSFO stocks of 20-30 days in violation of their agreement with the government despite the fact that they have so far received total Rs314 billion.
Refineries have lamented that all power plants’ storage is currently under utilised which is severely affecting all local refineries, which are heading towards a forced shutdown that will impact motor spirit (MS), high speed diesel (HSD) and jet fuel availability.
Earlier this month, in a letter to DG (Oil) Petroleum Division, Pakistan State Oil (PSO) pointed out that actual lifting by IPPs since July has been significantly short which has resulted in the over accumulation of stock inventory.
On December 3, the Oil Companies Advisory Council (OCAC) had written to the director general Oil Petroleum Division saying that local oil refineries are the backbone of the country’s energy security, supplying over 11 Million Metric Tonnes (MMT) of various petroleum products but due to non-uplifting of fuel oil and limited storage, they are forced to reduce and in some cases, almost shut down crude processing which will affect the availability of the petroleum products, eventually disturbing an already fragile supply chain.
The OCAC pointed out that the government, during this year, has so far made substantial payments to IPPs that are bound to keep mandatory stocks as required according to Fuel Supply Agreements (FSAs) with OMCs.
On December 10, the Petroleum Division’s DG (Oil) requested the Division to direct the power plants to uplift furnace oil through PSO/OMCs immediately for stock buildup and provide payments/Letter of Credits (LCs) to PSO.
According to DG (Oil) letter, last fuel position meeting chaired by Minister for Energy during decided that power plants will lift the furnace oil (FO) for stock buildup and for consumption in case of exigencies.
According to a report by Dawn which quoted a senior PRL executive, almost all refineries are facing storage constraints and shutting down further production gradually. Rented storages have massive costs.
Dawn’s source claimed the Power Division had made a mess of things with the Pakistan State Oil (PSO) having imported refined oil in large quantities at the expense of the local refineries. “The IPPs say they don’t have the money to pay PSO because of non-payment of their arrears. Hence, the PSO was reluctant to supply oil to them,” he added.
He went on to predict that all refineries would shut down in 15 days if the issue wasn’t resolved immediately.
