Ogra allows Parco to export 50,000 tonnes of furnace oil

KARACHI: The Oil & Gas Regulatory Authority (Ogra) has allowed Pak Arab Refinery Limited (Parco) to export 50,000 metric tonnes (MT) of furnace oil (FO) for the month of July in the current fiscal year, according to a statement issued by Ogra.

Parco, which currently holds 93,000 MT of fuel oil stock, half of the total fuel oil reserves across refineries amounting to approximately 170,000 MT, sought approval from Ogra to facilitate the export.

The export of furnace oil has reached unprecedented levels, with the country shipping out over 800,000 MT during the recently concluded financial year, marking a historic high in fuel oil exports.

Industry insiders in the oil sector attribute this surge in exports to reduced domestic demand, particularly from power generation, which traditionally peaks during summer but declined significantly this year. Refineries consequently ramped up diesel and petrol production for local consumption, leading to surplus fuel oil available for export at comparatively lower prices.

They added: “Refineries had to operate more for the production of diesel and petrol to meet the local demand, which also resulted in the production of fuel oil in huge quantity.” They pointed out that fuel oil used to be consumed in substantial quantity in the local market in summer as power plants would begin uplifting furnace oil. This year, however, power plants did not uplift furnace oil and refineries had no option but to export furnace oil even at a relatively low price -- as the local market always offers higher prices compared to exports.

Per the insiders, exporting fuel oil has become essential for refineries to maintain operational efficiency due to the challenge of storage limitations caused by excessive accumulation.Pakistan’s refining sector has been grappling with diminishing local demand for fuel oil, resulting in periodic surpluses and storage challenges.

Earlier expectations of reducing fuel oil production under the Brownfield Refinery Policy have been delayed, despite industry agreements aimed at enhancing production of higher-value petroleum products such as petrol and diesel while curbing fuel oil output. The policy’s implementation, initially promising significant reductions in fuel oil production, has faced setbacks with a recent six-month extension by the government.

The policy, crafted with input from the refinery industry, aims to align local production with Euro V standards, enhancing the output of motor spirit (MS) and diesel while curtailing furnace oil (FO) production.

The upgrade policy is anticipated to enable refineries to increase the total production of MS by 99 per cent and diesel by 47 per cent. The production of furnace oil is expected to reduce by 78 per cent. Refineries also remain cautiously optimistic about future reductions in fuel oil production, contingent upon the timely implementation of policy measures aimed at aligning production with international standards and market demands.