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Future demand of furnace oil.

The cost of furnace oil imports during the next five years is expected to jump from 170 million dollars to over half a billion dollar at current prices, if Government's plans for the power sector are implemented on schedule. At present the power sector is consuming around 2.35 million metric tons of fuel oil. Under 1.7 million tons is being produced in the local refineries of which Karachi Refineries are producing 1.25 million tons and Attock Refinery over 400,000 tons. The balance quantity of 2.1 million tons is being imported at a cost nearly 170 million dollars.

The major user of furnace oil is Wapda which is consuming around 234,000 tons at Jamshoro. Besides Wapda the Karachi Electric Supply Corporation is also using around 130,000 tons for power generation at its units in Bin Qasim and Korangi Thermal Power Station.

Steep rise in furnace oil use is expected from next year when power production by Wapda from Muzaffargarh units gets underway. In 1992-93 with the commissioning of Guddu Power Station further rise in furnace oil consumption is envisaged. Besides, Wapda, KESC's consumption will also jump by 50 per cent with the commissioning further units at Bin Qasim in 1991-92.

Besides the public sector-two units sanctioned in the private sector are also expected to go into operation by 1992-93. They are Xenal/Hawker Sidley at Hub which is expected to produce 1200 megawatts of electricity. Another sanction has been accorded to Fauji Foundation who in collaboration of Babcock USA is setting up a power plant of 300 megawatts. When all these power plants gradually come on stream Pakistan would require to import over 4.5 million tons of furnace oil by 1992-93 which at present price would cost around 360 million dollars. This figure would take an astronomical jump, in 1997-98, to 650 million dollars and will be over 700 million dollars by the turn of the century.

The furnace oil requirement for power is besides the requirement of hydrocracker unit if and when established. At present the schedule is for 1997-98 for it to come on stream. However, any increase in requirement of furnace oil will be more than adequately compensated by production of HSD and Kerosene which is four times more expensive to import. The Government has taken a decision to use furnace oil for power generation besides hydropower and also gradually phase out the use of natural gas for production of electricity.

Besides adding to the import bill, the movement transportation of such huge quantities would need to be undertaken. For this purpose the Government is planning to lay pipelines from the port to Bin Qasim, within Karachi and also from Karachi to Hub and Jamsboro. The proposal to procure furnace oil with viscosity of 400 CST appears to have been dropped on account of the additional cost which will have to be borne to transport this viscose furnace oil. Presently the power sector is using furnace oil with viscosity of 180 CST which is though more expensive by four dollars a ton, however, is easier to transport with less heating thant the more viscose furnace oil of 400 CST. A comparative study will be carried out by PERAC to assist planners. At present around 122 Mmcfd of natural gas is being consumed to produce around 4400 megawatts of electricity. Gas consumption will peak to 160,000 Mmcfd by 1993-94. And after the commissioning of furnace oil fire power generation units the natural gas consumption will continue to drop. Similarly the High-speed diesel oil consumption for power generation will also slide down from half a million tons-for production of 890 megawatts of electricity - to 140,000 tons by the turn of the century, once Wapda's Kot Addu and Shahdara Units are converted from HSD to furnace oil.

Presently around 400 tank lorries of 8 to 24 tons are plying between KPT and Bin Qasim for supply of furnace oil. The road capacity to handle such a heavy traffic is neither adequate nor is the mode of transport very reliable. Also the decanting facilities at KESC power station appear to be inadequate to handle so many wagons. The position is expected to get worse with the commissioning of Bin Qasim Unit No. 3 and 4 as the plants for a pipeline from refineries in Karachi to Bin Qasim is suffering mainly on account of contractual and right of way problems.

To overcome this obstacle the Government has reportedly asked PQA to convert one of its dry jetties for handling of imported furnace oil for KESC's Bin Qasim unit. Besides this the government has also directed KESC to improve its decanting facilities and expand its storage facility at Bin Qasim. Railways has also been asked to ensure a daily train between Karachi Port and Bin Qasim and Pakistan State Oil have been ordered to despatch furnace oil mainly in large capacity tank lorries. With the commissining of the two major private sector projects for which letters of intent have already been issued namely the Hub River Project and the Fauji Foundation Project, the only option appears to be to implement a similar pipeline project from port to Hub. Besides laying of pipeline for movement of furnace oil within Karachi area the Government is carrying out a study for laying ouf furnace oil pipeline from Karachi to Jamshoro. The project traffic of furnace oil from Karachi is expected to be 2.11 million tons in 1992-93, increasing to 3.7 million tons by the turn of the century. Since the movement of such an enormous capacity would require augmentation of raileays capacity, a study is being carried out to lay a by-directional pipeline between Jamshoro and Karachi.

The consultants have reportedly advised the Government to start construction on this pipeline so that it could be completed by mid 1990-91, with a design capacity of 4 million metric tons and an initial throughput of two million metric tons. If this proposal is implemented the requirement of number of trains for movement of petroleum product from Karachi, would considerably reduce. Besides the pipeline the Government is also directing the Railways and the oil marketing companies to improve their facilities as recommended by the overseas consultants Foster Wheeler. The consultants have recommended for (a) Improvement of availability, scheduling and performance of engines; (b) Improvements and greater efficiency in filling and decanting operations; (c) Doubling of railway tracks on proper locations; (d) Equipping tank wagons for furnace oil with heating coils; (e) Implementation of block fuel train concept; and (f) induction of improved axle and roller bearing boggies with the trolley. The gigantic task before the Government is to dove-tail the plans for port modernization with augmentation of railway capacity and creation of pipeline and storage facilities to carry this enormous load for operational efficiency.
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Publication:Economic Review
Date:Feb 1, 1990
Previous Article:Occidental of Pakistan.
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