Weak monsoon boosts demand for diesel

Pakistan is seeking gasoil due to unavailability of hydropower and gas.

Reuters August 22, 2012

SINGAPORE: Pakistan is seeking its largest monthly diesel imports in a year with consumers turning to standalone power generators as shaky power grids come under increased pressure from weak monsoons.

Below-average rains have curbed hydropower generation in Pakistan, and have boosted agricultural demand for diesel to power irrigation systems.

State-owned importer Pakistan State Oil (PSO) is seeking an additional 110,000 tons of gasoil after last week tendering for up to 305,000 tons for the first time in three months, its largest requirement in more than a year.

“Pakistan needs to buy gasoil due to the non-availability of hydropower and a gas shortage faced by power plants,” a Pakistan-based industry source said.

“The country’s gasoil demand this time last year was quite low due to floods, so PSO has been forecasting higher rainfall and had planned imports accordingly. The delayed monsoon has surprised everyone.”

Pakistan’s spot requirements for gasoil are above its long term-contractual agreement with Kuwait Petroleum Corporation, with whom it is set to buy around 3 million tons of gasoil this year.

Growing needs

In the same tender, PSO is also seeking one million tons of fuel oil and gasoline for delivery from October to December.

Pakistan’s oil demand has grown by a total of about 35,000 barrels per day (bpd) over the past five years to around 400,000 bpd this year, with the majority of that increase from fuel oil, which is used in oil-fired power stations, said Faruq Taib, an analyst at FACTS Global Energy in Singapore.

“The country is facing a severe gas shortage and the bulk of their power generators are gas-fired ... so they’re moving towards oil,” Taib said.

Gasoline demand has also increased due to the gas shortage as more car-users are switching to petrol from compressed natural gas, he added.

The country’s government faces a circular debt problem where state utilities lose money from non-paying consumers and low electricity prices and cannot pay power-generating companies who in turn cannot pay gas suppliers.

Published in The Express Tribune, August 23rd, 2012.

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