Refineries mull import delays as diesel demand dips

KARACHI: The refining sector is contemplating a delay in crude oil import schedules amid low domestic consumption and high stocks of high-speed diesel (HSD), industry officials said.

The excess supply has led one refinery to consider a temporary halt in operations as early as next week, they added. "Pakistan Refinery Limited (PRL) has warned about the shutdown of its plant next week due to the slow uptake of high-speed diesel (HSD) in a communication to the Ministry of Energy and Oil & Gas Regulatory Authority on Friday," a source said.

The PR's HSD stock has reached its maximum storage capacity of 14,000 tonnes. "Our daily production of HSD is around 2,500 tonnes against the daily uptake of around 1,000-1,200 tonnes," the PRL said in the letter. The refinery is constrained to reduce the refinery throughput, effective from March 22, 2024, and is trying to secure rental storage for storing HSD.

“If the current demand pattern for HSD continues, we will be forced to shut down the plant next week,” the PRL said, adding that it will face ullage issues for incoming crude cargoes and will have to pay demurrage to the vessels. “We are trying to defer our crude consignment for the month of April.”

The other refineries are also facing the same situation, as officials in the refining sector said that refineries are planning to defer crude oil imports as "diesel consumption has dropped to the lowest level despite the harvesting season in the country."

Sources said that Cnergyico Refinery is also contemplating deferring crude oil imports in the coming weeks after the HSD uptake from the refinery has dropped sharply.

Current consumption rates stand at approximately 13,000 tonnes per day, contrasted with a production of 14,000 tonnes from local refineries. Historically, the demand would escalate to 25,000-26,000 tonnes daily during peak agricultural activity.

Industry officials said this year’s outlook appears bleak, with no marked improvement in diesel usage, even in Sindh where the harvest season has commenced. The diesel consumption has mainly fallen due to its high price as well as a slowdown in the economy. The high price of diesel has pushed consumers to use smuggled Iranian diesel, which is cheaper and is being supplied from the neighboring country.

Sector people pointed out that as the diesel consumption is on the lower side, state-owned oil marketing company Pakistan State Oil (PSO) has placed substantial orders for diesel imports in anticipation of the agricultural harvesting season as it ordered around 400,000 tonnes of diesel for March and April shipments.

The state-owned oil marketing company has placed these orders in view of the perceived high demand for diesel due to the harvesting season in March and April, however, the ground situation is contrary to the demand, industry officials said.