Pakistan’s June fuel oil imports, mainly for power generation, were at all-time high volumes of nearly 850,000 tons, 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 record high levels, totalling more than 700,000 tons, while purchases of low-sulphur fuel oil (LSFO) were at about 130,000 tons, figures from the 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 tons, for August to October delivery, by Pakistan State Oil (PSO), industry sources said.
“The power shortages have been quite serious and have lasted for over a month now. They are maximising the utilisation of oil-fired thermal plants because there is also not enough generation via hydropower,” a source said.
“It’s an issue of the consumption being greater than the ability of the 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.”
The 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 reached 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.
Most of the supplies come from the Middle East, due to freight advantages because of the proximity to the country, versus East Asian players.
Published in The Express Tribune, July 12th, 2011.
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No single company has the ability to raise their prices, but if they raised their internal discount rates for petroleum-based projects relative to other projects, then they may not invest as heavily in expanding capacity, which could raise the price of petroleum in the long-run and drive adoption of more fuel efficient vehicles.
Hybrid vehicle sales are strongly correlated to the price of petroleum. Higher prices would mean more profit for the oil industry even if the incremental increase in revenue may be less.