Reportedly, the Government of Pakistan (GoP) has confirmed that the operations of local refineries had slowed down because of high production of residual fuel oil (RFO) and the international ban on its use for bunkering after 31st December, 2019.
In a statement, Petroleum Division has said that because of new regulations issued by the International Maritime Organization (IMO), crude oil import had reduced during the first six months of the current fiscal year. Under these regulations, RFO containing more than 0.5% sulphur content is disallowed for use in ships and its violation carries heavy fines.
Most of the refineries operating in the country hardly produce furnace oil of less than 3.5% sulphur content. As a result, furnace oil prices have plummeted by almost three times. The local refineries on an average produce almost 25% furnace oil from their total crude processing.
Interestingly, the crude oil import plunged by 27% in dollar terms and about 15% by quantity during the first six months of the fiscal year before the IMO regulation came into force on 1st January, 2020.
Petroleum Division said it was engaged in development of a plan to upgrade oil refineries. It also said that the reduction in oil import bill was caused by increased share of power generation on coal and LNG. Another factor in reduced import bill was the increased movement of high speed diesel through rail. The use of motor gasoline also reduced due to a decline in sale of vehicles and better availability of CNG in the last 12 months.
The GoP has also taken a plea that the growth rate of economy has indeed slowed due to fiscal stabilization program, but the size of industry or transport had not reduced drastically.
Contrary to the claims of Petroleum Division, the data released by the Pakistan Bureau of Statistics showed 12.2% decline in production of petroleum products by the local refineries during the first five months of the current fiscal year. The PBS data showed that output of 10 out of the 11 petroleum products was lower as compared to last year.
Production of two major oil products — motor gasoline and high speed diesel, mostly used in the transport and agricultural sectors — was down by more than 13% each during the first five months of the current fiscal year. Production of furnace oil was down by almost 16%, but this could be attributed to the declining share of furnace oil in power generation. Jet fuel output was down by 4.27% and that of kerosene by 5.85%.
Total oil imports amounted to US$6.14 billion during first half of the current year, compared to US$7.66 billion during the same period last year.
Import bill of crude oil was down by 27% during the first six months of the current fiscal to US1.77 billion against US$2.43 billion of the same period last year.
The import bill of liquefied natural gas (LNG) also dropped by 4.83% to US$1.6 billion during the first half of the current fiscal, compared to US$1.7 billion during the same period last year.
The import quantity of petroleum products also fell by 12.63% to 4.66 million tons. The crude import quantity was 14.5% lower to 3.95 million tons during the first half of the current fiscal against 4.6 million tons during the same period last year.
The import of liquefied petroleum gas (LPG), on the other hand, went up by almost 34% to US$114 million, but this could not dent a massive decline in the import bill of petroleum group because of its limited market share. The import of other products in the petroleum group fell by 69%.