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.

Pakistan: Power Generation decreases by 3.2%YoY in January 2023

Power generation has been reported at 8,515GWh for January, 2023, remaining flat MoM while decreasing by 3.2%YoY as compared to 8,797GWh generated last year.

This takes cumulative energy generated for the first 7 months of FY23 to 77,085GWh, a decrease of 7.3%YoY.

The demand supply shortfall remains a persistent issue in the country, where peak demand for the month was estimated between 16,000-17,000MW.

Circular debt for the power sector has been reported at PKR2.5 trillion as compared to PKR2.25 trillion in June 2022.

According to the revised Circular Debt Management Plan presented to the IMF, FY23 is targeted to close with a Circular Debt stock of PKR2.4 trillion after a PKR335 billion payout will be given in June to reduce the accumulation for the year.

Hydel generation for the month under review was reported at 800GWh, decreasing substantially on a monthly basis as January is the month of least hydrology in the country historically.

Hydel generation was up 56% on a yearly basis, partly due to dependable capacity on Hydel increasing to 10,592MW.

The significant increase in power generation have been seen from Coal fired power plants, with generation up 61%MoM aided by the new Thar Coal Block-1 and ThalNova plants which were added to the grid, along with increased generation from the plants running on imported coal to cover for the lack of hydel generation in the month.

Furthermore, Furnace oil (FO) based plants have finally seen an uptick in utilization, with 463MW generated in the month as compared to merely 39MW last month.

Despite this, owing to better availability of lower-cost alternatives, FO generation was down 63%YoY and remains at highly diminished levels.

Average cost of generation for the month under review rose by 59% to PK11.2/kWh owing to the decrease in generation from Hydel plants and the consequent increase in reliance on thermal sources.

In terms of the generation mix for January, the largest contributors are Coal (29%), followed by Nuclear (22%), RLNG (15%), Gas (13%) and Hydel (9%).

Coal based generation in generation mix has risen to 29% from the 18% recorded last month.

Generation from thermal based power plants was recorded at 63% of total generation in the month, considerably lower than the 3 year average of monthly generation in the month of January of 74%, mainly due to the emergence of new Nuclear based capacities.

HUBC has seen significant increases in power generation, with 58GWh more power generated in this month, while down by 72%YoY despite the new TEL plant coming online this year.

Utilization for the CPHGC remains meager at 6% for January, while the base plant generated 0.9GWh after three months of no utilization.

On the flipside, the more efficient Narowal plant witnessed significant utilization of 37% in the month with 56.5GWh generated, while the TEL plant remains well-utilized at 69% due to its high placement in the Merit Order.

KAPCO remains non-operational owing to the expiry of its PPA and is still out of the Merit Order, although it has sold 2.7GWh from its RLNG plant in the month.

NPL and NCPL have also seen a surge in utilization for the month as the plants are relatively less expensive compared to their peers in the FO group, with the plants recording 40% and 29% in utilization respectively.

As the hydrology in the country improves post January, the cost of generation should decrease going forward as reliance on thermal sources decreases in tandem.