Power generation: Is FO coming back?
From its share in power generation in the previous years to its high price as a fuel cost and its repercussions on the environment, furnace oil has been a troublemaker. It started when the furnace oil started being replaced in the power generation mix by coal and RLNG, and it made sense, as the expensive furnace oil was no longer feasible relative to the imported RLNG and new coal power plants coming online. The curtailment gave a breather to petroleum imports. However, it is also whenfurnace oil started wreaking crisis after crisis and the refineries a run good for their money. Refineries in Pakistan run on hydro-skimming technology, where the percentage of FO production is much more than in a system of deep conversion refineries thatproduces more of the other value added petroleum products. Apart from the regular winter crisis where domestic off-take came under threat due to lower power demand, FO curtailment’s adverse effects on the downstream oil and gas sector have taken up a notch with the IMO 2020 Regulations that has resulted is spiraling down of furnace oil prices. With no recovery insight for prices, FO is a threat to the downstream oil sector.