Pakistan lifts fuel oil import ban to address power cuts

 
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Singapore, April 24 (TNS): Pakistan has lifted a ban on fuel oil imports to address the problem of planned power cuts as energy consumption rises towards the summer season, an official with the petroleum ministry said late last week, says a press release issued by Singapore based global price reporting agency “S&P Global Platts” here on Tuesday.

The decision to lift the import ban was made April 17 during a meeting by Pakistan’s Economic Coordination Committee, chaired by Prime Minister Shahid Khaqan Abbasi.

Current fuel oil stocks are seen as extremely low, at 335,000 mt. Power producers would need an estimated 18,000 mt/day of high sulfur fuel oil between April and September to meet seasonally higher electricity demand, according to the Ministry of Water and Power.

State-run Pakistan State Oil has already bought 420,000 mt of 180 CST HSFO with a maximum sulfur content of 3.5% for delivery over May 3-28 to Port Qasim from Bakri, Vitol and Gulf Petrochem. The last time the company bought HSFO was for December delivery, S&P Global Platts reported previously.

PSO is also seeking 60,000 mt of 170 CST low sulfur fuel oil with maximum 0.95% sulfur for May 5-12 delivery to Port Qasim. The tender closed April 23, with validity until May 12.

Pakistan has halted power generation from oil-fired units with a combined capacity of more than 4,000 MW/day in October and decided to halt fuel oil imports in December.

The decision came amid the startup of Pakistan’s second LNG terminal, the beginning of slow winter demand season and the government’s resolve to reduce power generation from ageing oil-fired plants to reduce pollution.

As fuel oil purchases from power plants fell abruptly, stocks rose rapidly at import terminals and domestic refineries, delaying deliveries of imported cargoes and disrupting operations of domestic refiners. As a result, the government decided to restrict fuel oil imports on December 28 with immediate effect.

But electricity demand has increased to 17,000 MW/day against production of 15,000 MW/day, leading to daily power cuts of six to eight hours. And in peak summer season, demand is expected at around 21,000 MW/day, the official said.

There is also low power generation from hydropower plants as the melting season has not yet commenced, an official at the Ministry of Water and Power said. Currently, electricity generated from water reservoirs is around 1,700 MW/day compared with capacity of 7,000 MW/day, he said.

During November 2017 to February 2018, Pakistan imported 638,000 mt of fuel oil, down sharply from 1.9 million mt in the year-ago period, data from Oil Companies Advisory Council showed.

While the government has lifted its ban on furnace oil imports, upstream and downstream sectors and private power producers are still entangled in the issue of circular debt.

The amount stuck in debts once again rose to Pakistan Rupee 650 billion ($5.62 billion) whereas power companies owe Rupee 330 billion to PSO.

When the current government of Pakistan Muslim League-N came into power in 2013, the debt was Rupee 503 billion which was cleared in over a month period. But in five years time, it again swelled substantially, according to Zeeshan Afzal, head of research at Karachi-based brokerage house Insight Securities.