Refining sector set for massive furnace oil exports

KARACHI: The local refining industry is set to export huge quantities of furnace oil in the coming weeks, with expected shipments surpassing 100,000 tonnes.

Since the beginning of the current fiscal year, domestic demand for furnace oil has nearly disappeared, prompting refineries to focus on exports.Pakistan Arab Refinery Limited (PARCO) has issued a tender for the export of 50,000 tonnes of fuel oil, while Pakistan Refinery Limited (PRL) has requested authorization from the Oil & Gas Regulatory Authority (Ogra) to proceed with its own export plans.

PRL aims to export 50,000 tonnes by the end of this month and an additional 25,000 tonnes in early September.According to industry sources, local consumption of fuel oil has been virtually non-existent this fiscal year. Last year, Pakistan set a record by exporting 820,000 tonnes of fuel oil, with nearly 137,000 tonnes exported in May alone.

The decline in domestic consumption is attributed to power plants ceasing to use furnace oil for electricity generation, as it is a costly option that ranks low in priority for fuel use. “We are exporting furnace oil even at lower rates than the domestic price because storing it at the refinery can disrupt operations,” industry representatives noted.

The new refining policy will reduce furnace oil production once refineries are upgraded. The policy aims to cut the output of high-sulphur fuel oil by 78 per cent, from 15,500 tonnes per day to 3,400 tonnes per day. It also calls for a significant decrease in the production capacity of fuel oil at refineries, as upgraded facilities will produce more gasoline and diesel from crude oil.

Existing refineries are encouraged to modernize and expand to produce environmentally friendly fuels meeting Euro-V standards, while maximizing the output of motor gasoline and diesel and minimizing furnace oil production.However, refinery upgrade agreements have stalled due to the lack of a sales tax exemption on petroleum products, which has deterred refineries from finalizing agreements with Ogra.