The Oil Companies Advisory Council (OCAC), a body of oil refineries and oil marketing companies (OMCs), has written a letter to the Petroleum Division, cautioning that storages of independent power producers (IPPs) have become empty.

Despite that, according to the OCAC, the power producers have refused to procure furnace oil from refineries, where stocks are piling up and forcing them to close processing units. The oil industry lobby, in the letter, requested the Petroleum Division to ask the Power Division to issue directives to the IPPs to purchase furnace oil from OMCs.

“If IPPs buy stocks from OMCs, then marketing companies will be able to take furnace oil supplies from refineries,” it said.

OCAC’s letter has followed hard on the heels of similar communications from refineries and Pakistan State Oil (PSO) earlier. OCAC emphasised that refineries were the backbone of energy security, supplying over 11 million tons of various petroleum products annually but owing to limited storage, they were forced to reduce throughput/ close crude processing.

This “will affect the availability of all other petroleum products, eventually disturbing the already fragile supply chain.”

It is worth highlighting that OMCs consume finished products of refineries before making imports and only deficit volumes can be imported. On firm demand from the Power Division, OMCs were allowed to import low sulphur fuel oil (LSFO)/ high sulphur fuel oil (HSFO) between July and November 2021.

However, due to the absence of procurement of committed quantities by Gencos/ IPPs, the stocks built up at OMCs’ storages, consequently the purchase of HSFO/LSFO from refineries remained limited, resulting in stock pileup there as well.

On the other hand, the refineries were planning to export fuel at a great financial loss, OCAC said. “This export will cripple the already overburdened port infrastructure and the industry will face huge demurrages as well.”