Pakistan's fuel oil exports in the first half of the current fiscal year hit a record high, surpassing the previous year's total, as the shift to cleaner energy sources led to a sharp drop in domestic demand, data from the oil industry showed.

The country exported about 600,000 tons of fuel oil from July to December 2023, surpassing the total exports of 277,000 tons for the entire fiscal year ending June 30, 2023, the data showed.

Fuel oil exports surged in November and December, with local refineries exporting large quantities of the product to sustain operations and avoid shutdowns, as they did in the previous winter season.

In the first five months of the current fiscal year, fuel oil exports stood at 358,000 tons.

Pakistan's refining industry produces large quantities of fuel oil through crude oil processing.

This fuel oil is mainly used in the local market for power generation. However, due to its low priority on the fuel list, oil-fired power generation has declined sharply in recent years as the country has shifted to liquefied natural gas (LNG) and renewable energy sources.

"Despite low global fuel oil prices, refineries have no choice but to export to keep operations afloat," a senior refinery official, who did not want to be named, told The News.

He said the refineries are forced to sell fuel oil at low prices as the margins for fuel oil are negative compared to diesel and gasoline. "Exporting is the only option to keep refineries operating; otherwise, they will have to shut down, as seen last winter."

Officials said local refineries produced large amounts of furnace oil in the first half of the current fiscal year, which must be exported to maintain the refineries' function of producing diesel and gasoline for local consumption.

In FY2023, HSD and Mogas account for 43% and 24% of total POL production, respectively, while fuel oil accounts for 23%.

According to oil industry data, Pakistan Refinery Limited (PRL) exported 30,000 tons of fuel oil in December, while Atok Refinery Limited (ARL) exported more than 40,000 tons in the same month.

Exports from Pak Arab Refinery Limited (PARCO) and Cnergyico were even higher, with the two refineries able to export around 100,000 tons of fuel oil each.

Last fiscal year, fuel oil exports were mainly driven by demand from Sri Lanka, which is facing a power crisis due to drought affecting hydroelectric power generation.

However, exports are now mostly destined for Africa and the Middle East, the executive said.

He added: "The refining sector is facing challenges due to low demand for fuel oil, low prices and lack of upgrading and modernization of refineries."

The official said the government should provide incentives and support to the refining industry to enable it to produce more value-added products and reduce its dependence on fuel oil.

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