Pakistan's fuel oil exports hit all-time high in Dec as domestic utility demand falls

Pakistan's fuel oil exports rose to an all-time high in December amid declining demand from domestic utilities as the country focuses on alternate fuels such as gas and coal for power generation.

The South Asian nation exported 135,551 mt of fuel oil in December, about 37% higher from 98,830 mt in November, according to data released Jan. 18 by Pakistan's Oil Companies Advisory Council (OCAC), which compiles data related to fuel consumption, imports and exports.

Fuel oil exports in the six months ended Dec. 31, 2023 stood at 433,945 mt, up from an overall export volume of 276,979 mt during the fiscal year ended June 30, 2023, the OCAC data showed. Pakistan's financial year runs from July to June.

Domestic consumption of fuel oil has been on a declining trend since long as the government has been encouraging electricity generation from other cheaper sources like coal, nuclear and regasified LNG, leaving huge stockpiles of fuel oil, said Muhammad Awais Ashraf, director research at Akseer Research.

The country's fuel oil consumption has also fallen as a result of the government's plan to run tube wells in villages on solar power instead of fuel oil, Awais said.

Fuel oil consumption dropped to 0.08 million mt in December, down about 33% year on year, OCAC data showed. Consumption in the six months ended Dec. 31, 2023 stood at 0.56 million mt, down about 61% on the year, the data showed.

The decline in fuel oil usage was also reflected in the data on power generation. In the six months ended Dec. 31, about 1,353 Gwh electricity was produced from fuel oil-fired plants, down from around 3,185 Gwh generated during the same period a year earlier, official government data showed.

As of Jan. 17, Cnergyico had fuel oil stocks of 56,250 mt, while PARCO had 50,000 mt, Attock Refinery about 18,300 mt, Pakistan Refinery about 12,900 mt and National Refinery around 2,213 mt, according to data provided by industry sources.

Asia's supply of 180 CST high sulfur fuel oil is set to rise in 2024 amid structural changes in South Asian demand as the region pushes for cheaper or cleaner alternative fuels in power generation, possibly setting the stage for a sustained narrowing in the viscosity spread, S&P Global Commodity Insights reported earlier.

Alongside Pakistan, the changes have been also apparent in Sri Lanka and Bangladesh, where either fuel oil exports have been or are expected to rise, or imports plummet, as governments and power generating companies rely more on coal, nuclear, gas or LNG for electricity generation.

Platts assessed the Singapore 180 CST HSFO cash differential over the Mean of Platts Singapore 180 CST HSFO assessment at $1.08/mt Jan. 18, hovering at its lowest level in a month amid sluggish demand and competitive offers for physical cargoes seen in the week that began Jan. 15.

The Singapore 180 CST HSFO February-March market structure was assessed at $1.20/mt at the Asian close Jan. 18, down from $2.80/mt Jan. 17, S&P Global data showed.

The Asian HSFO market in general is expected to be sluggish in 2024 as more-than-adequate supplies and a steady decline in utility demand offsets incremental consumption by new scrubber-installed ships coming out of yards, S&P Global reported earlier.