Pakistan consolidates its position in the club of furnace oil exporting countries

Till recently Pakistan was suffering from glut of furnace oil (FO), mainly because the incumbent government had decided to stop its use in power generation. However, the efforts by Pak Arab Refinery (PARCO) have made Pakistan a FO exporting country. PARCO is scheduled to export another shipment of 50,000 tons FO by the end of this month.

This would be the refinery’s second export cargo during the current financial year (FY24), as it exported 50,000 tons FO in the last month too.

Amidst the high stocks across the country, PARCO holds the largest stockpile of FO at above 55% of the total stock of fuel oil available with the local refineries.

PARCO has opted to export FO in order to gain maximum in terms of foreign currency to address its issue related to payment of dividend to its foreign partner.

During the last fiscal year (FY23), PARCO along with Pakistan Refinery (PRL) exported a record over 264,000 tons fuel oil because of refusal of power plants to lift it for power generation as it fell in the bottom of the priority list of sources for generation of electricity.

As a result of the refusal, the country accumulated a huge stock of fuel last year, of which some quantity was exported by the two refineries.

During FY24, only PARCO has exported the fuel oil so far in order to earn foreign exchange as other refineries have been selling it in the local market.

According to energy sector experts, PARCO currently possesses 57% of the total FO stock of the refineries followed by PRL, having 14% of total stocks.

Attock Refinery (ARL) possesses 12% of the total stock followed by National Refinery (NRL) and Cnergyico with 11% and 6% stock respectively.

Sector people said that lifting of the fuel oil by the power plants has seen some improvement in recent weeks as the heat of summer has pushed the demand of electricity higher, particularly in Punjab. Although hydropower generation has also gone up significantly, power demand is also being met with the furnace oil burning in the power plants, which improved the lifting of fuel oil from the local refineries.

The government of Pakistan has been trying to phase out fuel oil from the power generation mix to move to greener and more sustainable indigenous options. As per the Generation Capacity Expansion Plan (IGCEP) 2022-31, the total share of green energy is targeted to reach 59%, while FO is set to be phased out by 2031.