Karachi March 1 2022: OCAC called for maximum run rate of refineries and curtailment of power generation on HSD to meet harvesting season demand in a time when international market is facing acute HSD shortages.
During last 10 days shortages of HSD is reported by International energy publications.
The reasons of which are depletion in HSD stocks of America due to exceptionally high gas prices, the EU refineries are operating on lower than normal throughput
During 2020 the use of Jet fuel was minimal and refineries adjusted their production slate to maximize HSD production. With the increase in Jet fuel demand in 2021-22 the refineries are producing more jet fuel to cater the demand which in turn reduced the availability of HSD
China announced ban on HSD exports to meet its internal demand.The Jet fuel premiums are more attractive than HSD thus prompting refineries to enhance Jet fuel production and reducing HSD availability.
The price differential between Crude Oil and HSD prices as reported in Platts is about 16$/barrel, highest in last few years subsequently HSD prices are higher than gasoline prices, a phenomenon not seen in last 18 months. The situation is further aggravated by eruption of Fire in a major refinery in Taiwan.
During March- June the harvesting season will be in full swing in South East Asia thus availability constraints will push HSD prices further and countries dependent on imported HSD will struggle to procure the product.
Our country imports over 40% of its requirement from international market and most of the importing OMCs (barring 4 top OMCs) are dependent on a single supplier which is facing investigations by Agencies over alleged involvement in Hascol default with banks.
The HSD stock situation is satisfactory in the country today as 460,000 MT useable stocks (22 days’ cover) based on 21000 MT daily sales are available but with the commencement of harvesting season the daily sales will reach to 25000-30000 MT/day. If planning is not done today, we may face problems in meeting the demand during harvesting season. Due to financial issues of Hascol, the local banks are reluctant to enhance the credit limits as Oil sector companies are identified by banks as high risk entities.
Therefore OCAC suggest that Refineries to plan their crude procurement for March-June 2022, to operate on maximum throughput to meet high demand.
The constraints faced by refineries to operate at maximum level be removed to ensure maximum product availability locally. Any unplanned HSD demand by Power Sector must be avoided during March – June 2022 as it will further deteriorate stocks situation.
Local Furnace Oil maximum burning by Power Sector will also allow refineries to operate on optimum throughput thus producing more HSD.
All importing OMCs be advised to plan their HSD imports keeping availability in international market, their demand forecast, revisit their supply chain and reduce reliance on a single supply source to avert breakdown of country’s Supply chain. OCAC is hopeful that if government act today, it will be able to overcome the challenge of managing the supply chain and avert situation faced in 2015 and 2020.
