Pakistan’s fuel oil imports hit 4-year high as it struggles to buy LNG

Pakistan’s monthly fuel oil imports are set to hit a four-year high in June, according to Refinitiv data, as the country struggles to buy liquefied natural gas (LNG) for power generation amid a surge in heat that stimulates demand.

A resurgence in demand for waste fuel from power plants underscores the energy crisis facing the South Asian country and slows its efforts to switch to cleaner fuel.

Pakistan had reduced fuel oil imports since the second half of 2018 as LNG prices were low, but has had to switch back to oil at times since July 2021 due to sky-high LNG prices.

The country’s fuel oil imports could climb to around 700,000 tonnes this month, after hitting 630,000 tonnes in May, according to Refinitiv estimates. Imports last peaked at 680,000 tonnes in May 2018 and 741,000 tonnes in June 2017.

A spokesman for Pakistan’s energy ministry cited global prices as the reason for the surge in fuel oil imports.

The trend is also expected to continue in July as Pakistan State Oil (PSO) received offers from Coral Energy to supply two shipments of High Sulfur Fuel Oil (HSFO) and one shipment of Low Sulfur Fuel Oil (LSFO). ) for delivery the second half of July, industry sources said. PSO had requested five shipments in the tender, according to its website.

“Import data indicates that thermal power generation companies in Pakistan made the initial switch from gas to fuel oil late last year and the price dynamics continue to provide an incentive to maximize fuel oil purchases by compared to LNG,” said Timothy France, senior MENA oil analyst. at Refinitiv.

LNG spot prices in Asia surged last week, following European gas prices, as a prolonged shutdown of a US export plant prompted Japan and South Korea to buy.

Pakistan LNG, in its second bid to purchase four LNG shipments for delivery in July, received only one supply offer for one shipment from QatarEnergy on Thursday.

Pakistan LNG, however, did not accept the supply offer due to cost.

The country, which is facing a serious energy crisis, has put itself in conservation mode to reduce its consumption and avoid power cuts.

“The weather conditions in Pakistan seem very favorable for demand. Cooling demand generally remains high until mid-September, implying that imports could remain high in June, July and August,” France added.

While oil-fired power generation was relatively flat year-over-year, it climbed 15% in May from the previous month, according to data from Topline Research.

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