Fuel oil exports surge as winter cuts power demand

KARACHI: Refinaries are set to export more than 150,000 tonnes of fuel oil in December, a record high for the month, as domestic demand slumps due to lower power generation from the heavy fuel, industry sources said on Tuesday.

"Local refineries have accumulated a large stock of fuel oil and will be exporting a record amount," said sources in the oil sector, adding that the Oil & Gas Regulatory Authority (OGRA) has allowed the refineries to export after local consumption slumped due to low power generation from fuel oil.

Pakistan exported 115,000 tonnes of fuel oil in November of this financial year, which was a record at the time. December is expected to surpass this figure as refineries line up for this huge export.

According to available figures, the Pakistan Refinery Limited (PRL) is set to export 25,000 to 30,000 tonnes of fuel oil in the remaining days of this month. Attock Refinery Limited (ATL) plans to export 25,000 to 30,000 tonnes of fuel oil, and Pak Arab Refinery Limited (PARCO) will be exporting 50,000 to 55,000 tonnes of fuel oil, followed by Cnergyico Limited, which will export 45,000 to 50,000 tonnes during the current month.

Industry sources said the refining sector has opted to export fuel oil after accumulating a large stock following the low generation of power from fuel oil in the country. They said that winter has set in, and temperatures have dropped significantly in the north of the country, which has drastically cut electricity consumption. As a result, fuel oil power generation is no longer required.

They added that although refineries are receiving lower prices for fuel oil in the international market compared to the domestic price, they are forced to export it as local power plants are not interested in purchasing it.

They said that margins on fuel are negative compared to diesel and petrol, and refineries are forced to sell fuel oil at low rates. "However, this option is necessary to keep refineries operating; otherwise, they would have to shut down, as witnessed last year during the winter."

Pakistan's refining sector produces a significant amount of fuel oil from the processing of crude oil. It was mainly sold in the local market for power generation. However, due to its low priority on the fuel list, power generation from it has dropped sharply. In FY23, the production of HSD and Mogas stood at 43 percent and 24 percent, respectively, of the total POL production, whereas the proportion of FO clocked in at 23 percent.