SINGAPORE: Pakistan’s June fuel oil imports, mainly for power-generation, were at all-time high volumes of nearly 850,000 tonnes, on the back of severe power shortages in the country, official data showed on Monday.
Imports of high-sulphur fuel oil (HSFO) were also at records-high levels, totalling more than 700,000 tonnes, while purchases of low-sulphur fuel oil (LSFO) were at about 130,000 tonnes, figures from the country’s Oil Companies Advisory Committee showed.
The heavy requirements, up by more than 20 per cent versus May, are expected to continue in the near term and reflected by the purchase of 1.62 million tonnes, for August to October delivery, by Pakistan State Oil, industry sources said.
“The power shortages in the country have been quite serious and have lasted for over a month now. They are maximising the utilisation of their oil-fired thermal plants because there is also not enough generation via hydropower,” a Pakistan-based source said.
“It’s an issue of the consumption being greater than the ability of the country’s grid to provide power for, right now, and it’s been a problem since the country started running low on natural gas supplies earlier this year.”
Pakistan’s utilities are unable to meet demand requirements despite having sufficient rainfall during the monsoon season to generate hydropower, and importing high volumes of fuel oil to maximise its oil-fired thermal plants.
The shortfall in power-generation capacity has at about 6,000 megawatts (MW), resulting in daily blackouts of 10-12 hours in big cities and 18-20 hours in smaller ones, the sources said.
Pakistan’s electricity demand is 18,130 MW, but production is at around 12,000 MW, hydropower accounting for about 40 per cent, thermal power making up for about 15 per cent and the rest coming from Independent Power Producers, they added.
AVG MONTHLY VOLS AT RECORD-HIGH
With the June imports, Pakistan’s monthly average volume for the year stands at about 606,000 tonnes, the highest on record and up about 10 per cent from last year’s monthly average.
Import volumes are expected to stay high at least until October, following PSO’s purchase of the August-October volumes via tender.
The tender, for 20 HSFO cargoes of 65,000 tonnes each and six LSFO lots of 60,000 tonnes each for August to October delivery on a cost-and-freight (C&F) Karachi basis, at steady to higher premiums compared to its last deal.
The requirement, which averages 550,000 tonnes for each of the three months, come on the back of similarly heavy purchases for June-October delivery, totalling 1.62 million tonnes, or about 340,000 tonnes per month.
Most of Pakistan’s supplies come from the Middle East, due to freight advantages because of the proximity to the country, versus East Asian players.
International players such as European traders Vitol and Trafigura have muscled into the Pakistan market, traditionally a stronghold of Middle East players such as Bakri and FAL Oil, in the past year, after they set up shops in the United Arab Emirates port of Fujairah.
The presence of the international players was boosted by Pakistan’s increased requirement for fuel oil of less than one per cent sulphur, particularly since 2009, when it had to reactivate older power plants to meet increasing demand for electricity.
The strong Pakistan demand is reflected by fuel oil’s firm time spreads that has been in steep backwardation of above $3.00 a tonnes since February, and averaged at $5.29 in June, while the July average was at $3.46 as of last Friday.