Pakistan’s Fuel Oil Imports to Hit 4-Year High Despite Supply Crunch

Pakistan’s monthly fuel oil imports are projected to hit a four-year high in June as it struggles to procure liquefied natural gas (LNG) for power generation, as reported by Reuters.

According to Refinitiv statistics, the return of leftover fuel demand at power plants highlights the South Asian country’s energy predicament and how it hinders its efforts to convert to cleaner fuel.

Pakistan reduced fuel oil imports in the second half of 2018 due to low LNG costs, but it has had to revert to oil on occasion since July 2021 due to the sky-high prices of LNG.

Refinitiv forecasts the country’s fuel oil imports to reach 700,000 tons this month, up from 630,000 tons in May. It is noteworthy that imports previously peaked at 741,000 tons in June 2017 and later at 680,000 tons in May 2018.

Timothy France, a MENA senior oil analyst at Refinitiv, told Reuters that the “import data indicates that thermal power generating companies in Pakistan made the initial switch from gas to fuel oil late last year and the price dynamic provides an ongoing incentive to max out fuel oil purchases over LNG”.

“Weather conditions in Pakistan appear highly supportive of demand. Cooling demand typically remains high until mid-September, which implies that imports could remain elevated in June, July, and August,” he added.

According to industry sources, Pakistan State Oil (PSO) has received proposals from Coral Energy to supply two high sulfur fuel oil (HSFO) cargoes and one low sulfur fuel oil (LSFO) cargo for second-half July delivery. PSO’s website also shows that it solicited five shipments in the tender.

Pakistan LNG received a single supply bid for one cargo from QatarEnergy on Thursday in its second effort to acquire four LNG cargoes for delivery in July. However, the state-run company did not accept the supply proposal due to the high cost.

The country has been in ‘power-saving’ mode to minimize usage and avoid blackouts due to a serious energy crisis. Although fuel oil-based electricity production was essentially stable year-on-year, it increased by 15 percent in May over the previous month.