Pakistan Refinery Ltd Halts Operations Due to Limited Storage Capacity

The Pakistan Refinery Limited (PRL) has temporarily halted its productions due to operational and ullage restrictions. According to a regulatory filing shared with the Pakistan Stock Exchange, the refinery will remain closed until the situation improves. A senior PRL official told a national daily that the company was forced to suspend operations due to a lack of storage space. The crisis emerged as a result of the refusal of independent power producers (IPPs) to lift fuel from the storage for emergency use. As the power sector is not lifting refined fuel oil from the local refineries, almost all of them are facing storage constraints and are gradually shutting down production. The official explained that rented storages have massive costs, which is why no one is interested in them except for one company that plans to export fuel oil. He blamed the Power Division for botching up by allowing Pakistan State Oil (PSO) to import refined oil in significant amounts at the expense of the local refineries. “The IPPs claim they are unable to pay PSO because their arrears have not been paid. As a result, the PSO was hesitant to give them oil,” he explained. Before importing to meet inventory, oil marketing firms (OMCs) consume refinery-produced finished products. However, the GENCOs and the IPPs had failed to lift the committed volumes, resulting in a stockpile in OMCs’ storage facilities. Oil imports (mainly refined petroleum products) accounted for the majority of the nearly 83 percent increase in imports during the first five months of the current fiscal year (July-November). The fact that local refineries remain underutilized while refined products are imported results in substantial losses in the shape of capital outflows.