Govt To Import Furnace Oil To Meet Winter Power Generation Demand

The Spot LNG Price Is Higher Than The Cost Of Furnace Oil And, Therefore, Import Of Furnace Oil For Power Generation Is Relatively Cheaper Option

To cover up the looming energy crises in country, the government has decided to import furnace oil for power generation to meet the winter season power generation demand after PLL has failed to procure any LNG cargo for the months of December and January.  The decision in this regard was taken in a review meeting of the technical teams of the Power and Petroleum divisions that held under Federal Minister of Energy, Hammad Azhar. The meeting also finalised the load management plan for the upcoming winter season, which will be executed after the approval of the Federal Cabinet. Hammad Azhar said that under the load management gas supply will be ensured to power sector, export oriented sector, fertiliser and domestic consumers. The general industry, cement sector and CNG sector will face the brunt of gas shortage in the season.

The meeting reviewed the LNG supply and demand during previous and upcoming winter season. The meeting was informed that last year in November and December, 11 cargoes of LNG per month were procured. However, for November and December of upcoming winter season 10 LNG cargoes are available. The meeting was informed that PSO will import seven LNG cargoes per month for the next four months from November 2021 to February 2022 under the long term contract. PLL would procure two cargoes each per month for November and December under long term contract. Pakistan LNG Limited (PLL) did not get even a single bid for its eight LNG (liquefied natural gas) cargoes, under the spot purchases, meant for the months of December 2021 and January 2022 mainly due to supply constraints in the international LNG market. It has also been decided that PLL would not go for re-tender for December-January because of high international prices of LNG. Due to unavailability of the planned four cargoes per month for December and January, the gas shortage will further widened by 400 Million Cubic Feet per month.

The meeting was informed that out of a total supply of about 4,000 million cubic feet per day, 70 percent gas is indigenous while the remaining is imported. The average cost of around 2,800 MMCFD indigenous gas is $4 per MMBTU while the cost of 1,200 MMCFD LNG is much higher than the local production.  The meeting was informed that the cost of LNG procured under long term agreement is very much low than the spot purchases of LNG. The spot LNG price is higher than the cost of furnace oil and, therefore, import of furnace oil for power generation is relatively cheaper option. The meeting decided that the shortage caused by the unavailability of spot purchases of LNG should be bridged through imported furnace oil. The furnace oil will be used for power generation to meet the energy requirement of industrial sector.

This news was originally published at Nation