Pakistan exports 1.2m tonnes of furnace oil

KARACHI: Pakistan exported 1.2 million tonnes of furnace oil in the first 10 months of the current financial year, driven by persistently low domestic demand for power generation.

According to official data, the country exported 1.1 million tonnes of high sulphur furnace oil (HSFO) and 112,045 tonnes of low sulphur furnace oil during the review period.In April alone, refineries exported 97,452 tonnes of HSFO, down from 162,468 tonnes in March.

“Refineries are exporting furnace oil because of its low utilisation in power generation,” a senior official from a local refinery told The News. He said that more than 400,000 tonnes of furnace oil remain in stock, a volume that continues to rise due to ongoing local production. To manage surplus and maintain operations, refineries are turning to exports. On Thursday, one local refinery exported 25,000 tonnes, with more shipments planned in the coming days.

Power generation data for the first 10 months of the current fiscal year confirms a near-zero contribution from furnace oil, which has become an expensive and low-priority fuel for electricity production.

Refineries in Pakistan are working to significantly reduce HSFO output under the new refining policy. The plan aims to cut HSFO production by 78 per cent -- from 15,500 metric tonnes per day to 3,400 metric tonnes -- once planned upgrades are implemented. However, the upgrades have been delayed due to disagreements over sales tax exemptions on petroleum products in the current fiscal year. Despite this, industry insiders remain optimistic that a breakthrough will eventually be achieved. They cite the government’s recent decision to increase the Inland Freight Equalisation Margin (IFEM) on petrol and diesel to offset losses of around Rs34 billion in the oil sector. The sales tax exemption provision was included in the Finance Bill 2024-25.

The IFEM has been raised by Rs1.87 per litre and will remain in place for 12 months. Sector representatives believe this measure will help refineries recover their financial losses. They noted that while the industry has repeatedly called for an end to the sales tax exemption, such a move could only be enacted through the finance bill -- prompting the government to instead approve the IFEM increase as a temporary financial support mechanism.