According to Refinitiv data, Pakistan’s monthly fuel oil imports are set to reach a four-year high in June. This is largely due to a heatwave that is driving up demand for power generation.
The country is struggling to buy liquefied natural gas (LNG) at affordable prices, which has caused a resurgence in residue fuel demand at power plants. This highlights the energy crisis faced by Pakistan and slows its efforts to switch to cleaner fuel sources.
According to Refinitiv estimates, the country’s fuel oil imports could reach approximately 700,000 tons this month, after previously hitting 630,000 tons in May. This would be the highest import rate since 680,000 tons in May 2018, and 741,000 tons in June 2017.
A spokesman for Pakistan’s energy ministry attributed the recent surge in fuel oil imports to global prices. According to industry sources, the trend is set to continue in July, as Pakistan State Oil (PSO) has received offers 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. PSO’s website indicates that the company had sought five cargoes in the initial tender.
According to import data, Pakistani thermal power generating companies switched from gas to fuel oil late last year. The ongoing price incentive to purchase fuel oil over LNG provides motivation to continue these practices. Timothy France, a MENA senior oil analyst at Refinitiv, stated this information.
Recently, Asia LNG spot prices have been following European gas prices as an extended shutdown of a US export plant has caused buying from Japan and South Korea.
Pakistan LNG, in its second attempt to buy four LNG cargoes for July delivery, received only a single supply bid for one cargo from QatarEnergy on Thursday.
Pakistan LNG, however, did not pick up the supply bid due to the cost.
The country, which is facing a severe energy crisis, has been in a conservation mode to reduce consumption and stave off blackouts.
“Pakistan’s weather conditions look very promising for demand. With cooling demand usually high until mid-September, this suggests that imports could stay high in June, July, and August,” France continued.
According to Topline Research, fuel oil-based power generation was relatively stable year-on-year, but it rose 15 percent in May from the previous month.