PARCO dispatches 50,000 tonnes furnace oil to Singapore

KARACHI: Furnace oil glut has forced the country’s refining sector to start exporting the fuel, with Pak Arab Refinery Limited (PARCO) taking lead by exporting the first cargo of 55,000 metric tonnes on Sunday night.

PARCO despatched the furnace oil to Singapore, The News learnt on Monday. The tender for this cargo was floated by PARCO at the beginning of December 2022, and Dubai-based E3 Energy DMCC won the tender for the export.

Sources in the refining sector said that PARCO had to export furnace oil to keep the refinery running. They said that PARCO Managing Director Shahid Mahmood Khan took the decision to export the fuel oil.

If the decision was not taken, the refinery would have shut down due to the accumulation of huge furnace oil stocks. Before the export of fuel oil, PARCO had almost fifty percent of total stockpile with the local refineries following slump in demand.

The demand dropped because thermal power plants stopped stockpiling furnace oil which was on the bottom of the electricity generation merit list. Also, electricity demand had declined due to winter.

When PARCO refinery accumulated excess furnace oil, which was not being taken by the power plants, it started storing the fuel at Port Qasim for exports.

Sources in the sector said that PARCO sold the stock to a foreign group at free on board (FOB) plus five dollars. Although the export price was low, it would help the refinery keep the operations.

Before the export of 55,000 tonnes, the country’s total furnace oil stock stood at 592,000 tonnes. Refineries have 233,000 tonnes or 39 percent of the total stock.

Oil marketing companies hold 186,000 tonnes or 31 percent of the total stock, whereas power plants currently carry 172,000 tonnes or 29 percent of the total stocks available in the country. Out of the total stocks with refineries, PARCO held 108,000 tonnes of furnace oil or 46 percent. This now stands at 53,000 tonnes, following Sunday’s export to Singapore.

Cnergyico has 45,000 tonnes furnace oil or 19 percent of total stock carried by refineries, Attock Refinery Limited (ARL) holds 37,000 tonnes or 16 percent, Pakistan Refinery Limited (PRL) stockpile stands at 25,000 tonnes or 11 percent, and National Refinery Limited (NRL) is carrying 17,000 tonnes or seven percent.

Furnace oil stockpiles started increasing after power plants refused to lift the fuel oil despite government instructions. Their reason of refusal was the low demand of electricity, which made power generation from expensive furnace oil economically unfeasible.