In June, Pakistan’s monthly fuel oil imports are expected to reach a four-year high. According to Refinitiv data, the country struggles to buy liquefied natural gas (LNG) for power generation amid a heatwave that is pushing demand.
The country did not reach to this point overnight, the import bill rose 94% in April compared to $1.14 billion for the same month of last year.
The resurgence in residue fuel demand at power plants highlights the South Asian country’s energy crisis and slows its efforts to transition to cleaner fuel.
Pakistan reduced fuel oil imports in the second half of 2018 due to low LNG prices, but it had to switch back to oil on sometimes since July 2021 due to skyrocketing LNG prices.
According to Refinitiv projections, the country’s fuel oil imports could reach 700,000 tons this month, up from 630,000 tons in May.
Imports peaked in May 2018 at 680,000 tons, and in June 2017 at 741,000 tons.
According to industry sources, Pakistan State Oil (PSO) has received proposals from Coral Energy to supply two high sulfur fuel oil (HSFO) cargoes and one low sulfur fuel oil (LSFO) cargo for second-half July delivery.
According to PSO’s website, it had sought five shipments in the tender. “Import data indicates that thermal power generating companies in Pakistan made the initial switch from gas to fuel oil late last year and the price dynamic provides an ongoing incentive to max out fuel oil purchases over LNG,” said Timothy France, a MENA senior oil analyst at Refinitiv.
Asia LNG spot prices rose last week, reflecting European gas prices, as a prolonged shutdown at a US export plant urged Japan and South Korea to buy.
Pakistan LNG received a single supply bid for one cargo from Qatar Energy in its second effort to purchase four LNG cargoes for delivery in July. However, due to the high cost, Pakistan LNG did not accept the supply bid.
The country is attempting to cope with severe energy crisis as federal as well as provincial government is promoting energy conservation drives to stave off blackouts. Moreover, harsh weather conditions highly supported cooling demand which typically remains high until mid of September which implies that increasing trend in imports will be observed for July and August as well.
According to Topline research statistics, while fuel oil-based power generation was relatively stable year on year, it increased by 15% in May compared to the previous month.