Furnace oil exports cross 1.4m tonnes

KARACHI: Pakistan exported over 1.4 million tonnes of furnace oil in the financial year ended June 30, 2025, driven primarily by persistently low domestic demand for power generation.

According to official data, the country shipped 1.3 million tonnes of high sulphur furnace oil (HSFO) and 137,880 tonnes of low sulphur furnace oil (LSFO) during the year. In June alone, refineries exported 73,101 tonnes of HSFO, down from 121,066 tonnes in May.

The export volumes reflect furnace oil’s diminished role in domestic power generation, which has further declined following the government’s imposition of a cumulative petroleum levy and climate support levy amounting to Rs82,077 per tonne in the current fiscal year.

Furnace oil, a deregulated product with prices determined by market forces, is primarily consumed by domestic industries. An executive at a local refinery told The News that the levies would result in an 80 per cent price increase, rendering the fuel economically unviable for sectors such as cement, shipping, textiles, glass, tyre manufacturing, large-scale industrial units, and foundries -- all reliant on boilers and furnaces.

“The sharp increase will crush domestic furnace oil demand and trigger a steep decline in industrial activity, potentially forcing partial or complete shutdowns -- especially in sectors with no viable fuel alternatives,” the Oil Companies Advisory Council (OCAC) said in a recent letter to the Special Investment Facilitation Council (SIFC).

Given the subdued domestic demand, the refining sector sees little promise in furnace oil exports either, which are not considered financially viable. “Refineries would be compelled to export FO at a significant financial loss, further weakening the already precarious financial health of Pakistan’s refining sector,” the OCAC warned.

Power generation data for the first 11 months of FY25 confirm furnace oil’s near-zero contribution to electricity output, as it has become a costly and low-priority fuel source.

Refineries in Pakistan are currently pursuing plans to significantly reduce HSFO output under the new refining policy, which targets a 78 per cent cut -- from 15,500 metric tonnes per day to 3,400 tonnes per day -- once planned upgrades are implemented. However, these upgrades have been delayed due to disputes over sales tax exemptions on petroleum products during the last fiscal year.

The government has recently asked the refining sector to submit a comprehensive proposal to resolve the sales tax exemption issue, which continues to hinder the signing of refinery upgrade agreements.