| Welcome to Global Village Space

Friday, May 17, 2024

Pakistan’s Petroleum Industry Faces Decline Amidst Smuggling Concerns

Pakistan's petroleum industry faces a decline in sales amidst challenges of smuggling Iranian products, prompting calls for government action to ensure industry stability and investment.

The sale of total petroleum products in Pakistan experienced a significant decline, clocking in at 1.1 million tons in April 2024, marking a 6% decrease compared to the same period last year. This drop, the lowest in six months, was attributed to reduced sales of petrol and Furnace Oil (FO), according to data released by brokerage house Topline Securities. However, High-Speed Diesel (HSD) sales saw a slight improvement of 2% year-on-year.

Read More: Pakistan’s Lunar Ambition: ICUBE-Q Lifts Off on Historic Mission

Sales of Motor Spirit (petrol) fell by 9% year-on-year, totaling 0.53 million tons in April, while the volume of Furnace Oil (FO) plummeted significantly by 59%. This decline was attributed to lower power generation from FO-based power plants. On a month-on-month basis, petroleum products offtake decreased by 4% in April compared to March 2024.

Company-wise, Pakistan State Oil (PSO) and Shell Pakistan Limited (SHEL) witnessed declines in sales by 3% and 7% respectively, while Hascol Petroleum Limited (HASCOL) faced a substantial 23% decrease. PSO, however, managed to increase its market share from 49% in April 2023 to 51% in April 2024.

Concerns Over Smuggling and Industry Stability

The declining sales performance of oil marketing companies (OMCs) in Pakistan has been attributed to smuggling concerns, particularly of Iranian petroleum products.

Smuggling activities have significantly impacted local refineries and OMCs, leading to a downturn in sales. The situation worsened when one refinery had to shut down operations due to accumulated stocks of high-speed diesel (HSD) caused by decreased consumption amidst the influx of Iranian smuggled diesel.

The local oil sector has urged authorities to crack down on the smuggling of petroleum products to ensure the financial sustainability of the industry. Investments of billions of dollars in refinery upgrades are at risk without effective measures to curb smuggling.

The sector’s stability and future growth hinge on the government’s ability to address smuggling challenges and create a conducive environment for industry investment and development.