Pak Oil refineries shutting down production due to massive import of HSFO

The local oil refineries are shutting down their production due to massive import of High Sulphur Fuel Oil (HSFO) by the government and low demand from the power sector.

Pakistan Refinery Limited has become the third one to announce its closure following Byco Petroleum Pakistan Limited (BPPL), now renamed as Cnergyico Pk Limited, and National Refinery Limited(NRL), official source told The Nation.Byco had closed down two of its refineries a week ago, PRL had written to Stock Exchange for shutting down, while National Refinery Limited will be closing down during this week, the source said.

In a letter written to Pakistan Stock Exchange Limited on December 16, 2021, regarding its closure PRL has said that “In accordance with section 96 of the Securities Act 2015 and Clause 5.6.1(a) of PSX Regulations, this is to inform you that due to operational and ullage constraints, PRL has temporarily shut down its refinery operations until the situation improves.”.

Pakistan Refinery Limited has become third one to announce its closure following Byco Petroleum Pakistan Limited (BPPL)

However an official of the Energy Ministry argued that apparently NRL is shutting down due to annual maintenance. He said that NRL in a letter to the Petroleum Division (Ministry of Energy) had said that “We plan to undertake inspection and maintenance turnaround of 2021, for fuel refinery, DHT and platformer regeneration during 4th week of December 2021, upto end of 2nd week of January, 2022,”.However the source said that the main reason of the shut down is the none supply of furnace oil for power generation.

“I don’t know who is making the policies, where they are not buying cheaper local RFO and importing it on high price from abroad,” the official said. The source said that Independent Power Producers (IPPs) were bound to keep HSFO stocks for 30 days but they were not holding oil stocks as per the fuel supply agreement.When the refineries process crude oil, especially Saudi Crude then Furnace Oil is a natural component just like petrol, diesel, kerosene and LPG.

The source said that refineries and oil marketing companies have monthly Review Meetings chaired by DG Oil to see that all refineries all first run on maximum and only the deficit between demand and local production is to be imported. The refineries was asked by the government to produce more furnace oil as less LNG was procured, the source said. However, suddenly the decision was changed and furnace oil was imported. Even last week, 70000 tones RFO was imported, the source said.

The import is not only costing the country heavily, but the closure of refineries may also cause Petrol and HSD shortage in the country, it added.cThe official said that the cost of local furnace oil is Rs 90000 per tone, while the imported RFO cost Rs 140000 per tone. Intersestingly the local refineries was inviting tenders for the export of RFO on discount rate and on the other hand the government was importing expensive RFO.  

When contacted about the closure of its refineries an official of Byco said, on the condition of anonymity, that the company had closed down both of its refineries with the cumulative capacity of 156000 ton about eight days ago. However, he said the small refinery with the capacity of 30000 has been resumed its operations on Sunday. Chief Executive Officer, Zahid Mir, of PRL when contacted on the closure, he replied “The PRL is shutting down due to non supply of furnace oil because of no demand in the power sector. We had to shut down as our storage became full”.

Source: https://nation.com.pk/