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12-12-2018

Analysis: Pakistan orders halt of fuel oil imports amid rising stocks

Freight rates to carry a 60,000 mt clean product cargo from the UK Continent to West Africa on a Long-Range tanker vessel strengthened to a three-year high of w170 Friday Pakistan’s ministry of petroleum has ordered domestic energy stakeholders to halt fuel oil imports, optimize storage capacities and even export surplus to help ease rising stocks of the fuel, driven by the country’s shift to LNG-based power generation.

The order follows a warning by Pakistan’s refineries last month over potential shutdowns and a nationwide shortage of other oil products, especially gasoline and jet fuel, caused by critically low offtake from power producers.

“We have asked refineries to export or shift fuel oil surpluses to the storage of independent power producers,” said minister of petroleum Ghulam Sarwar Khan last week.

“Pakistan State Oil has been asked to stop fuel oil imports and lift volumes from refineries instead in order to meet demand from [power utility] K-Electric,” Khan added.

Fuel oil supply chain disruptions are certainly not new to Pakistan. An abrupt decrease in fuel oil orders from power plants in late 2017 led to a rapid rise in stocks at import terminals and domestic refineries, delaying deliveries of imported cargoes and disrupting operations of domestic producers.

Consumption is unlikely to recover, as the electricity feedstock landscape continues its switch to gas facilitated by an exponential growth in LNG imports expected to increase from 4.9 million mt of LNG in 2017 to nearly 24 million mt/year by 2023, according to S&P Global Platts Analytics.

The situation has forced refiners to lower throughput this year to an average of 60%-70%, according to letters sent to the ministry of energy in late November by the Oil Companies Advisory Council, Pak Arab Refinery (Parco), Attock Refinery, National Refinery and Pakistan Refinery.
Source: Platts

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