15 January 2004	Thursday	22 Ziqa'ad 1424

KARACHI, Jan 14: Pakistan is all set to re-enter the export business of furnace oil after a well over two decades following the issuance of a tender by Pakistan Refinery Limited (PRL) on Wednesday for export of 40,000 tons of fuel oil.

The quantity is estimated to be available for export during the end of January to first week of February. The last date of bid is January 23. "We expect to earn six to seven million dollars of foreign exchange from the first lot of cargo," Manager Commercial and Supply, Pakistan Refinery Limited, Aftab Husain, told Dawn on Wednesday.

In reply to a query about the export price, Mr Husain said it was linked with the international price currently prevailing in Singapore market. At present the rates in international markets are flying high.

Out of total 40,000 tons, the major share for export belongs to PRL while National Refinery Limited shares the rest. Responding to a query whether the refineries will sustain losses on exports, Mr Husain said: "We will have a negative impact on our profitability due to price differential between the local and the international market."

He said export earnings through furnace oil might rise in future as Pakistani refineries' product was not a crack material. "It is a straight run or virgin furnace oil that attracts a premium. The virgin furnace oil is used as a feed stock for value-addition to make premium products such as diesel, kerosene, gasoline, LPG, etc., in world markets."

Mr Husain said the current export quantity could be termed a short-term measure. "Refineries will again review the situation regarding the local demand. In case of any surplus in future another export tender will be issued," he said, adding the refineries are looking forward for value-addition.

He said fuel oil had become surplus since its main buyers like Wapda and other fuel oil dependent sources had shifted to natural gas. He added that the shifting to gas from fuel oil would result in saving of $600-700 million per annum.

For a long-term measure, the refineries (PRL and NRL) are also considering converting their 1.6 million tons straight run furnace oil into value-added product by exploring different options such as hydrocracker project, he said.

The project cost would range $150-300 million depending upon the deep conversion. He said Pakistan had not imported any consignment of furnace oil during the last six months. However, future imports and exports depend upon the local supply and demand balance.

Head of Research at Invest Capital and Securities, Mohammad Sohail said the main consumers of fuel oil were Hubco, Wapda and KESC. Currently, there is a glut of local furnace oil owing to switch over to gas, coal and hydel energy sources by these main fuel oil buyers. He said Hubco plant's capacity utilization remained below 10 per cent in the last three months.

Import of fuel oil touched a high of 5.7 million tons (costing $826 million) in 1999-2000, and last year (2002-03) it was around 4.1 million tons ($708 million). "Pakistan is unlikely to import any more furnace oil in 2004 owing to shift from fuel oil to gas by Wapda, KESC and other plants," he said.