To the relief of refineries, oil-fired power plants resume production

Eight plants had earlier been shut down on prime minister’s orders

KARACHI: Eight oil-fired power plants of cumulative capacity of more than 4,000 megawatts, which were earlier shut down because of expensive fuel, have resumed production to save the dying petroleum refineries, industry officials told The Express Tribune.

“Our both plants are running at full capacity,” Hub Power Company (Hubco) Chief Executive Officer Khalid Mansoor disclosed on Tuesday.

Hubco is a large oil-based power producer and runs two plants of cumulative 1,500-megawatt capacity at Narowal in Punjab and Hub in Balochistan.

Earlier, eight oil-based plants had stopped power production on the directive of Prime Minister Shahid Khaqan Abbasi at the end of October following start of four cheaper power plants - three gas-fired and one coal-based plant in Punjab.



They have total production capacity of 5,052 megawatts, comprising around 20% of power generation in the country.

A couple of weeks ago, a leading brokerage house had predicted in a brief report that the plants would be kept closed till April 2018.

The sudden closure of power plants had brought petroleum refineries to the verge of closure as their furnace oil supplies plunged to zero and storages were filled to the brim. With no storage capacity, the refineries were forced to stop production of furnace oil as well as other petroleum products like jet fuel, petrol, diesel and kerosene oil, industry officials said.

Elixir Securities said Kot Addu Power Company’s oil-based power plant had come back to life.

Hubco CEO linked the resumption of power production by oil-fired plants to three factors. These included reduction in gas supply to power plants following increase in domestic consumption, especially in the upcountry, with the arrival of winter; decline in hydroelectric power generation as water levels in rivers and dams dropped and efforts to keep oil refineries running.

People associated with power producers and refineries confirmed that many oil-based power plants had resumed production in recent days.

“Almost all oil-fired power plants have restarted production,” a power industry player said. “I don’t know at what capacity they are running, but a majority of them have resumed work.”



A refinery official added “most of the plants that have resumed production are currently running on imported furnace oil … the imported fuel is being given priority (in power production) to create space for the upcoming vessels bringing imported oil.”

Earlier, Pakistan State Oil placed orders for the import of around 500,000 tons of furnace oil on the demand of industrial clients, mostly power producers. The cargo is scheduled to arrive via seven ships in 45 days till the end of December 2017.

Oil sales drop

Fresh data shows that sales of oil marketing companies dropped 7% year-on-year in November 2017, led by weak demand for furnace oil which fell 29% due to reduction in power generation by oil-based plants, according to Elixir Securities.

“We foresee a recovery in furnace oil sales in the ongoing month (December) with hydel production declining due to severe winter conditions,” it said.

Growth in retail fuel sales remained muted in November with high-speed diesel sales up 2% whereas motor gasoline (petrol) demand rose 7%.

Published in The Express Tribune, December 6^th, 2017.

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