Furnace oil prices reduced

KARACHI: Oil refining companies have slashed prices of furnace oil by around five per cent, in line with the fall in the international market. Prices of imported furnace oil have also fallen by 3.4 per cent.

National Refinery Limited (NRL) and Pakistan Refinery Limited (PRL) have reduced prices by 4.72 per cent or Rs2,340 to Rs47,227.05 (ex-Keamari) per ton while Pak-Arab Refinery Company (Parco) has cut prices by 5.25 per cent or Rs2,760.03 to Rs49,770.63 per ton.

Prices of the imported product, being purchased by Pakistan State Oil (PSO), have also come down by 3.37 per cent or Rs1,609.92 to Rs47,767.59 per ton.

PSO imports furnace oil and also purchases the product from local refineries for supply to power producers. Almost all thermal power generation companies rely on High Sulphur Fuel Oil (HSFO) while only Kot Addu Power Company (Kapco) uses Light Sulphur Fuel Oil (LSFO).

Pakistan produces around 35 to 40 per cent of total electricity from thermal power plants which use furnace oil. The rest of the energy is produced through gas, water and nuclear means.

“This fall in prices is normal as rates decrease for one fortnight and then increase for another fortnight. It all depends on movements in the international market,” commented a PSO official.

“We make payments to oil suppliers after 21 days, which is the credit period, and the impact is passed to the consumers,” the official added.

This decrease in prices of furnace oil may provide some solace to the power producers who have already been feeling the heat of growing and uncontrollable inter-corporate debt.

According to one estimate, the debt has swollen to Rs300 billion, severely constraining the ability of refining companies to operate at maximum capacity.

In the previous review, PSO had increased prices of furnace oil by Rs1,455 to Rs49,567 per ton.

In the international market, crude oil prices stood at around $72 per barrel on Wednesday. About two weeks ago, prices were around $76 per barrel. Crude prices have been moving in the band between $70 and $76 for quite some time.

Published in The Express Tribune, September 2^nd, 2010.