Crisis-gripped nation: Iran offers furnace oil, LPG for Pakistan’s energy needs

Talks between the two sides in Tehran next week will firm up proposals.

ISLAMABAD:

At a time when furnace oil stocks have dropped to critical levels because of cash crunch, Iran offers export of a large quantity of fuel oil on long-term credit to help Pakistan satiate needs of power producers and ensure uninterrupted electricity supply to all consumers.

Iran has also expressed desire to export 10,000 to 50,000 tons of liquefied petroleum gas (LPG) every month to address gas shortages in Pakistan. If the plan goes through, Sui Southern Gas Company (SSGC) will import this LPG.

To firm up the proposals, a delegation from Pakistan is scheduled to hold talks with authorities in Tehran next week.

At present, mandatory furnace oil stocks that can meet needs of power plants for three weeks are hardly kept as marketing giant Pakistan State Oil (PSO) fails to push ahead with imports because of financial constraints caused by long delay in payments from its customers, particularly power plants.

Power producers need 35,000 tons of furnace oil per day to run thermal plants at full capacity.

On February 22, receivables of PSO against power producers and other customers stood at a whopping Rs141.5 billion, making it difficult for the company to make payments to international oil suppliers and domestic refineries. PSO has to pay Rs83.6 billion to international suppliers and over Rs35.2 billion to local refineries.

Talking to The Express Tribune, an official of the Ministry of Water and Power said average monthly fuel requirement of the power sector stood at 1 million tons, of which about 250,000 tons were produced by domestic refineries.

“So, if a deal is struck, Pakistan will import 750,000 tons of furnace oil per month from Iran,” he said, adding this meant Gulf Arab countries would lose a big chunk of Pakistan’s market.

According to sources, Iran has offered furnace oil of 280 centistoke (cst) grade, but it is not used in Pakistan. However, Iran can also export 380cst fuel, which it is supplying to the world market.

Recently, the government has decided to discontinue consumption of 125cst grade oil with immediate effect while 180cst grade will continue to be consumed, as proposed by the oil industry. This will help enhance kerosene and jet fuel production in the country. Any consumer requiring 125cst grade will have to import the oil.

“Domestic refineries will introduce a new grade of 380cst and detailed specifications in this regard will be finalised soon,” the ministry official said, adding this would pave the way for furnace oil imports from Iran. Price of this grade oil is lower compared to grades being consumed at present.

Published in The Express Tribune, February 24^th, 2013.

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