Business

Circular debt hits local output: Dependence on high-priced oil imports grows

Import bill may swell to $14.05b as local refining blending declines.

Express July 12, 2011 1 min read

ISLAMABAD:

Low production by local oil refineries, which has been plagued by inter-corporate debt, is pushing the country to rely more on import of petroleum products and the oil import bill is expected to swell to $14.05 billion in current financial year 2011-12.

Increase in international oil prices as well as strong domestic demand for furnace oil due to start of new thermal power plants are also contributing to the soaring import bill. Oil imports stood at $9.36 billion in financial year 2008-09 which would be going up to $14.05 billion this year.

According to government estimates, the country is expected to spend $8.51 billion on import of 13.6 million tons of refined products during the year, including high-speed diesel, furnace oil, JP-1 and motor spirit.

Of these products, import of furnace oil will rise to 8.3 million tons compared to 6.7 million tons in the previous financial year, costing $4.42 billion at an average price of $532 per ton. The rise in furnace oil import is being attributed to the start of new power projects and low production by refineries due to the circular debt.

In addition to this, the government has estimated spending of $5.54 billion on import of 63 million barrels of crude oil at an average price of $88 per barrel in the international market. According to the breakdown, five million barrels of Upper Zakum crude oil will cost $440 million, 12 million barrels of Murban crude oil will cost $1.06 billion and 36 million barrels of Arab light crude will cost $3.17 billion.

However, no import of crude oil will be made from Iran due to sanctions imposed by the United Nations.

Diesel import has been estimated at 3.63 million tons costing around $2.37 billion at an average price of $752 per ton.

Jet fuel JP-1 import is projected at 740,000 tons at a cost of $585 million at an average price of $790 per ton.

Import of petrol has been estimated at one million tons, which will need spending of $781 million against $787 million spent on import of 964,000 tons last year. Average price has been projected at $781 per ton.

Published in The Express Tribune, July 13^th, 2011.