Pakistan resumes fuel oil imports after four-month halt

Pakistan State Oil (PSO) this week issued its first fuel oil import tender for the year after suspending purchases at the end of 2017 ahead of an expected pickup in demand during summer.

PSO, Pakistan’s main oil importer, in December halted imports of fuel oil amid an abrupt drop in domestic demand as the South Asian country turned to liquefied natural gas (LNG) to fuel its power sector.

The state-owned oil company issued a tender notice inviting bids for the supply of an unspecified amount of high-sulphur and low-sulphur fuel oil for delivery over May 25-June 10 and June 11-June 30. Traders said the tender document was released this week.

The resumption in PSO’s fuel oil imports is expected to strengthen the regional market and restrict exports of the fuel from the Middle East, where most of Pakistan’s fuel oil is supplied from, three trading sources said.

“Pakistan’s power generation typically doubles during summer from winter levels and they will need fuel oil-generated power to make up for the increase,” said Nevyn Nah, oil products analyst at Energy Aspects in Singapore.

But technical issues at some of Pakistan’s newest gas-fired power plants could also be feeding the country’s renewed appetite for fuel oil.

“Operations at the new LNG power plants are reportedly not smooth and there’s potential delay to the start-up of several new LNG plants,” said Nah.

PSO did not immediately respond to phone calls and emails from Reuters seeking comment.

Before suspending imports, PSO typically tenders for about seven 65,000-tonne cargoes of high-sulphur fuel oil and around two 55,000-tonne cargoes of low-sulphur fuel oil each month.

On average, PSO imported about 400,000 to 650,000 tonnes of fuel oil a month in 2017. It last issued a fuel oil import tender in late 2017 for January delivery, but later cancelled it.

The drop in Pakistan’s fuel oil demand had also led to a buildup in domestic supplies, prompting PSO to issue a rare export tender for at least two fuel oil cargoes at the start of the year.