The country is a key importer of liquefied natural gas (LNG) and fuel oil used for power generation. Any significant increase in imports usually pushes up the prices of these fuels.
So far, from 2021 to September, the South Asian country has imported at least 785,000 tonnes of fuel oil through tenders, up 52% from what it imported in the whole. last year, according to data from tender documents and traders.
Its total imports of petroleum and refined fuels rose 24 percent to about 10 million tonnes in the fiscal year ended June, according to data from Pakistan’s petroleum ministry.
Its overall LNG imports rose 23% to around 5.3 million tonnes in August this year, compared to the same period last year, according to ship tracking data from Refinitiv Eikon.
“Many factories are increasing production as economic activities return to normal, which has been the main driver of the electricity sector,” a Pakistan-based source told Reuters, declining to be named because he did not was not allowed to speak with the media. .
The country, which borders India, Afghanistan and Iran, exceeded growth projections for fiscal year 2020-21 despite a third wave of COVID-19 infections, reaching a GDP growth of 3, 96%, after a contraction of 0.47% in 2019-20.
“Even if LNG prices are higher, the uncertainty of (local) production and demand from the fertilizer sector will force Pakistan to import it,” the source said.
Spot LNG prices in Asia are currently at their highest since January and also at their highest for this time of year since at least 2010.
Prices for 180 cst high sulfur fuel oil are currently at two-year highs, up 44% since January, but remain well below LNG prices in terms of energy content, making them more attractive to consumers. imports, traders said.
Still, switching from oil to gas in power plants is not easy, a second Pakistan-based source said, adding that gas is needed to supplement the use of oil when demand increases.
“Oil-fired power plants can start up in a short time and are typically used in the summer, when LNG power generation is still not sufficient,” the source said, adding that the demand for fuel oil could decrease from October when the demand for power generation will decrease as the weather cools.
The country also added about 250,000 tonnes of petroleum product storage this year, mainly for gasoline and diesel, and upgraded some existing tanks, which also increased demand for fuel, the first source said.
“But, high steel prices are putting pressure on construction projects, which in turn could put pressure on oil demand,” the source added.