As power producers are reluctant to procure furnace oil, state-run oil marketing firm Pakistan State Oil (PSO) has again sought government’s intervention, cautioning that the current situation may cause fuel shortage in the country.

PSO has been under pressure as its receivables have crossed Rs400 billion, a major chunk of which is owed by power producers. Earlier, the Power Division conveyed to PSO firm demand for furnace oil. In response, PSO imported two cargoes but later power producers refused to procure the oil.

According to sources, oil refineries are also facing the same situation and have written letters to the government to express concern.

They said that independent power producers (IPPs) were bound to keep high sulphur fuel oil (HSFO) stocks for 30 days but storages of all power plants were under-utilised.

However, export option for furnace oil is clearly not viable due to certain major reasons such as port congestion, negligible HSFO demand in the international market and financial losses caused by high furnace oil stocks.

Last week, the refineries floated an HSFO export tender but have not yet received any workable offer. Sources pointed out that the IPPs were not holding oil stocks as per the fuel supply agreement, which was an integral part of the power purchase agreement (PPA).

As per the master/PPA amendment agreements signed with oil-fired and other IPPs in February 2021, the power plants agreed to replenish fuel stocks (covering 20-30 days of requirement) as per their original PPAs.

In a letter sent to the Petroleum Division on November 22, PSO pointed to the refusal of IPPs to procure furnace oil despite a firm commitment.

Earlier on November 11, PSO had written a letter on the same issue.

Published in The Express Tribune, December 2nd, 2021.

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