Cabinet body initiates probe against plants running on furnace oil

Committee was informed it was a violation of economic merit order

ISLAMABAD: The Cabinet Committee on Energy (CCOE) initiated an investigation on Wednesday against violation of economic merit order regarding use of fuel in power plants and banned import of furnace oil for the next three months.

The committee, which was chaired by Minister for Petroleum Ghulam Sarwar Khan, was informed that the second LNG terminal was operating on half its capacity as power plants were running on furnace oil, instead of cheaper LNG, which was a violation of the merit order.

It was also informed that the power sector had given a demand of over 800mmcfd LNG but it used only 230mmcfd. The Power Division presented figures regarding use of fuel in power plants. However, the committee on energy directed the Power Division to give more details about use of different fuel in power plants.



The committee was told that power plants had been using imported furnace oil instead of LNG, which was a cheaper fuel. The Petroleum Division argued that locally produced furnace oil should be used first instead of imported fuel. The cabinet body decided to impose a ban on import of furnace oil and said that locally produced furnace oil would be used in power plants. Power Division officials informed the meeting that furnace oil was being used in power plants to stabilise the supply of fuel.

During the last several months, power plants were using furnace oil instead of LNG despite the fact that the second LNG terminal was operating on half capacity and consumers were paying full capacity payment. The cost of furnace oil based plants was Rs12 per unit whereas electricity was being produced on LNG at cheaper rates of Rs9 per unit putting burden worth billions of rupees on the power consumers.



According to a statement, the committee took an overview of power plants which run on merit order.

Resultantly, it was decided that must-run power plants should be brought on merit order. It was also decided that the Petroleum and Power Division will plan import and consumption of RLNG. It was suggested that Ministry of Ports and Shipping may also be included in CCOE. 

Published in The Express Tribune, November 29^th, 2018.

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