Pakistan: Refineries asked to raise petrol output

This morning I was shocked to read a news that the government has asked local refineries to overcome the likely shortfall of 8,000 tons of petrol in the country. This clearly indicates that the concerned departments were unaware of the factors responsible for the shortfall: 1) delay in opening of L/Cs due to the limited availability of the foreign exchange and 2) overflowing furnace oil storage tanks of the refineries.

Let me address the second issue first. In the recent past government asked power plants not to use furnace oil. The limited offtake of furnace oil forced the refineries to operate at lower capacity utilization. The decision has no rationale because running of refineries at lower capacity utilization, reduced output of petrol as well as diesel.

The worst has been the decision of the government to stop or delay opening of L/Cs. Though, the government as well as State Bank of Pakistan keeps on denying delay in the opening L/Cs, it emerged to be the harsh reality.

To be prudent, the government must allow: 1) opening of L/Cs for the import of crude oil – available on deferred payment from Saudi Arabia and 2) ensuring operating refineries at optimum capacity utilization.

Lately, PARCO has solicited order for the export of furnace oil, despite the impression that Pakistani refineries are not competitive in the global markets.

Sector experts are of the opinion that the government should immediately allow running of power plants on furnace oil.

Enhanced offtake of furnace oil will allow operating of refineries at optimum capacity utilization and achieve greater synergy and reduction in the cost of production.