Demand for furnace oil likely to increase, Pakistan

Demand for furnace oil likely to increase, Pakistan

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While furnace oil might have been planned to be phased out in the long term, the imports might not stay out of the system for long. The recent change of weather with soaring temperatures, forecasts of torrid summers, upcoming Ramadan and some uncertainty associated to the progress of coal power projects are all reasons for higher demand from the power sector particularly via furnace oil consumption.

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So far, only Sahiwal Power Plant in Punjab of 1320MW is functional, while others are yet to come online.

This increase in demand in furnace oil can be seen in recent month’s sales volumes of the OMC sector; for March 2018, there has been a 49 percent increase in FO volumes indicating the seasonal up tick.

However, March 2018 as well as 9MFY18 FO sales continue to remain lower on a year-on=year basis (46% and 24%, respectively) as this fiscal has seen contraction in furnace oil consumption by the power sector due to influx of LNG, coal and the policy decision by the government to close less-efficient power plants in a phased manner convert furnace oil-based plants to gas.

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On the other hand, the retail fuels like petrol and diesel continue to provide support to the overall petroleum sales; for March 2018, Motor Gasoline and HSD sales climbed by 5 and 9 percent, year-on-year, respectively. Overall, the two fuels have had nominal growth in 9MFY18 as well.

While furnace oil consumption had resumed a couple of months ago when the government altered its plan to address the concerns of a supply glut by the oil refineries and the oil marketing companies, it looks like the imports with resume soon too. The figure shows how furnace oil’s share in power generation during 1HFY18 dropped to 23 percent, versus 29 percent in 1HFY17. This is supplemented by with a tremendous increase in coal and RLNG imports.

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