Gas shortage likely to force FO imports for power generation

With consumers bracing for an expected gas shortage during winter, furnace oil (FO) is poised to make a comeback for meeting the power generation needs of the country.

Unlike last year, the gas crisis was likely to hit during peak winter (November and December), when the share of hydropower in the overall electricity generation mix declines considerably amid lower water supply, a research report of AKD Securities pointed out.

Consequently, the shortfall in generation would likely be bridged through expensive FO-based generation, the report added. The country’s switching over to FO-based power generation and import of this commodity has also been signalled by Federal Energy Minister Hammad Azhar

recently when he pointed out that FO would be imported to meet the shortfall in

electricity generation, if any, in the winter season.

“Gas was priority of the government for power generation when its rate was lower,” Najamul Hassan, oil and gas expert told The News International when he was approached for views on the present energy crisis.

Hassan, who also served in Hubco said that trade of FO in the global market has been rejected for power generation, but Pakistan was forced to import the fuel for power generation as imported RLNG was costing the country dearly. However, he believed that efficiency level of power generation on RLNG would be still higher than the same on FO, apart from its hazardous emissions for climate.

He said that presently the prices of RLNG and FO were being compared for more power generation on FO, however the efficiency level of both was not being given consideration. On the other hand, analyst Jehanzaib Zafar at AKD Securities believed that since the monthly fuel adjustments were made with a lag of two months, the impact of higher fossil fuel prices would be reflected during the month of January-February when monthly adjustment of Rs2-2.25/unit was expected.

He pointed out that the country which reported excess electricity capacity last winter on the back of various coal-fired projects achieving COD would now be facing the prospects of running inefficient FO-based plants.

Analysts fear the increasing burden on the power sector’s circular debt as growing dependency on FO would not pass on the full impact of cost of generation of electricity. Zafar also predicted inflationary impact caused by increased dependency on FO for power generation as unabated hike in fuel prices would start hitting in the coming months.

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