Refiners Warn of Petrol, Diesel Shortfall if FO Remains Unlifted

A severe petrol as well as diesel shortfall looms larger than ever as refineries are on the verge of closing/cutting crude oil processing because of a massive slump in the offtake of furnace oil (FO) by oil marketers and power plants, their representative body said on Tuesday.

Given no improvement in the situation, Oil Companies Advisory Council (OCAC), through latest correspondence, has appealed to Petroleum Division to direct Independent Power Producers (IPPs) and oil marketing companies (OMCs) to lift FO stock from refineries.

“Local refineries, being the backbone of energy security of the country, supply over 11 million tonnes of various petroleum products, but due to non-lifting of Fuel Oil, they, owing to limited storages, are forced to reduce throughput/close the crude processing, which will affect the availability of all the other petroleum product, eventually disturbing the already fragile supply chain,” said OCAC in a letter to Director General Oil (Petroleum Division).

Sources in oil sector told The News that crisis of petrol and diesel can be created due to prevailing situation in the sector.

Officials, privy to the matters, said the country keeps 30-35 days of diesel and 9-10 days of petrol stock.

“If refineries halted production the placement of orders for imported diesel and petrol would take time and in the meanwhile, availability of these products would be difficult,” the sources pointed out.

According to sources, the petrol crisis would be severer than diesel, but its availability would also be short.

OCAC asked the OMCs to consume refineries’ finished products before planning any imports.

“On the firm demand of Power Division, OMCs were allowed to import LSFO/HSFO during July- November 2021. But non-lifting of the committed quantities by the Gencos/IPPs caused stock buildup at OMCs storage…,” OCAC stated.

The oil sector trade body emphasised that before finalising import, locally produced furnace oil may be accounted for as this would result in decreasing the ever-increasing stocks of fuel oil at refineries and improve the availability of other petroleum products. Earlier this year substantial payments were released to independent power producers (IPPs) on the condition that they would keep mandatory stocks as required by their Fuel Supply Agreements with OMCs.

Today, all the storage of power plants were empty and IPPs were maintaining 2-3 day stocks in their storages,” OCAC stated and added that on the other hand, the refineries were planning to export fuel oil at great financial loss.

“This export will cripple the already overburdened port infrastructure and industry will face huge demurrages as well,” the oil body said.

For resolving the issue and to avert the looming crisis of unavailability of petroleum products, OCAC urged the government to direct IPPs to lift FO from refineries as IPPs had received billions of rupees from the government.

According to OCAC, to ensure availability of all the other petroleum products, refineries’ smooth operations are key and demanded of the DG Oil to contact Power Division for immediate placement of FO orders by IPPs to OMCs.

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