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Attock Refinery halts furnace oil production

Karachi : Attock Refinery Ltd said on Tuesday it is temporarily shutting down one of its main processing units for eight days owing due to low demand for furnace oil.

The buyers of furnace oil aren’t lifting the product from the refinery which has forced the crude oil processor to halt operations for the time being.

As a result, the refinery will operate at a capacity of 35 per cent. Adequate inventories of different products, however, will remain available to meet any immediate requirement, the company said.

An expert member of the refining industry indicated that the problem is a direct result of the country’s single energy buyer failing to dispatch independent power producers IPPs which use furnace oil.

The national power buyer asks all kinds of IPPs to generate electricity based on the so-called merit order, which ranks these firms in the ascending order of price per unit.

While in the first four months of 2022-23, the share of furnace oil–based electricity in the national power mix was only 6.1pc as opposed to hydel (34.5pc), nuclear (16.1pc), imported gas (16.1pc), coal (13.7pc) and local gas (10.2pc), according to data released by the National Electric Power Regulatory Authority.

Last year the same thing happened when huge stocks of furnace oil were left with the refineries. He blamed the government for leaving the five refineries high and dry every year.

Consumption of electricity goes down sharply every winter. It means the production capacities of IPPs that run on comparatively cheaper fuels like hydel, nuclear, coal and gas, don’t get fully exhausted. This leads to the furnace oil–based IPPs further slipping on the national merit order and seldom getting despatched around this time of year.

As for the refineries, cutting out furnace oil from the electricity generation mix poses an existential threat. Furnace oil is one of the many products they obtain by processing crude oil.

Scaling back production leads the refineries to produce smaller quantities of petrol, diesel and jet fuels for domestic supplies. As an inadvertent consequence of this policy, the country’s dependence on imported retail fuel increases, and so does the outflow of foreign exchange.

The optimum throughout of furnace oil for all refineries is about three million tons a year. It translates to the average production of 8,000-9,000 tons a day after accounting for all variables.

Burning about five tonnes of furnace oil produces one megawatt of electricity. It means the local production of 8,000 tonnes of furnace oil should be sufficient for generating 1,500-1,600MW a day, he said.

“The government should make it mandatory for the national power purchaser to buy at least 1,500 megawatts produced on furnace oil to ensure that the refineries stay operational,” said the veteran requesting anonymity.

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