KARACHI: Pakistan exported a record amount of fuel oil in the first half of the current financial year, surpassing the total exports of the previous year, as domestic demand plunged due to a shift to cleaner energy sources, data from the oil sector showed on Monday.
The country exported around 600,000 tonnes of fuel oil from July to December 2023, surpassing the total exports of 277,000 tonnes for the entire fiscal year that ended June 30, 2023, the data showed.
Fuel oil exports surged in November and December, when local refineries exported huge quantities of the product to keep their operations running and avoid a shutdown, as they had done the previous winter season.
In the first five months of the current financial year, fuel oil exports stood at 358,000 tonnes.
Pakistan’s refining sector produces a significant amount of fuel oil from the processing of crude oil.
This fuel oil was primarily used in the local market for power generation. However, due to its lower priority on the fuel list, power generation from fuel oil has declined sharply in recent years, as the country has shifted to liquefied natural gas (LNG) and renewable energy sources.
“Although the global prices of fuel oil are low, refineries have no option but to export to keep their operations smooth,” one of the top officials of a refinery told The News, requesting anonymity.
He said that margins on fuel oil are negative compared to diesel and petrol, and refineries are forced to sell fuel oil at low rates. “Export is the only option to keep refineries operating; otherwise, they would have to shut down, as witnessed last year during the winter.”
Officials said that local refineries produced a high quantity of furnace oil in the first half of the current fiscal year and had to export it to keep the refineries functional for the production of diesel and petrol for local consumption.
In FY23, HSD and Mogas accounted for 43 percent and 24 percent of the total POL production, respectively, while fuel oil made up 23 percent.
According to the oil sector data, Pakistan Refinery Limited (PRL) exported 30,000 tonnes of fuel oil in December, while Attock Refinery Limited (ARL) exported over 40,000 tonnes during the same month.
The exports from Pak Arab Refinery Limited (PARCO) and Cnergyico were even higher, as both refineries were able to export around 100,000 tonnes of fuel oil each.
In the previous financial year, fuel oil exports were mainly driven by demand from Sri Lanka, which faced a power crisis due to a drought that affected its hydroelectric generation.
However, the official said that the current export destinations are mostly in Africa and the Middle East.
“The refining sector is facing challenges due to the low demand and low prices of fuel oil, as well as the lack of upgradation and modernization of the refineries,” he added.
The official said that the government should provide incentives and support to the refining sector to enable it to produce more value-added products and reduce dependence on fuel oil.
