SINGAPORE, Aug 25: Rising natural gas supply and surging hydropower due to heavy rains stalled Pakistan’s demand for fuel oil imports in August and September and prompted refineries to cut throughput, industry sources said on Monday.
Fuel oil stocks have risen to 90 days of supply from 20-25 days prompting refineries to cut output to about 60 per cent of capacity from 80 per cent.
“National fuel oil stocks are at 90 days availability and most refineries have reduced their throughput to about 60 per cent due to a fuel oil disposal problem,” said an industry source, who asked not to be identified.
“There will be no imports for August or September,” he said, adding that Attock Refinery Ltd was the only firm running at near full capacity because it had space in its fuel oil storage tanks.
Pakistan imported five million tons of fuel oil in the fiscal year to June to meet annual demand of about 8.5 million tons. The difference is met by domestic production.
But fuel oil in the domestic market is facing increased competition from natural gas supplied by Sui Southern Gas Company Ltd and Sui Northern Gas Pipeline Company.
“Because of access to new gas fields since July last year, there has been an increase in gas of more than 150 million cubic feet per day,” said Siraj Shaikh, senior general manager of Sui Southern.
Additionally, Pakistan’s monsoon, due to last until mid September, has raised water levels allowing Pakistan’s two major hydropower plants, with output capacity of 4,800 megawatts (mw), to run at full capacity.
The next fuel oil imports are expected in October, when the first deliveries are due in a one-year tender awarded by state-utility Water and Power Development Authority (Wapda).
The company awarded the tender to Karachi Container and Engineering Pte Ltd, which has said it will deliver 660,000 tonnes on behalf of a U.S.-based firm.
However, some sources have said the volume would not meet Wapda’s expected demand in the year from October.
Wapda awarded the tender at $2 per ton over Mediterranean 180-centistoke (cst) quotes, much lower than other offers into the tender.—Reuters