Pakistan extends ban on high sulphur fuel oil imports

The Pakistan Ministry of Petroleum and Natural Resources has decided to extend the ban on High Sulphur Fuel Oil (HSFO) imports till December as the country consumes less amid surplus production of fuel oil.
A source close to the ministry told that a meeting was held under the chairmanship of Director General Oil (DGO) Sabir Hussain to review the supply-demand situation of HSFO. It was decided that since fuel oil was still in surplus quantity, there was no need to resume its imports in December, the source said, adding that a formal notification in this regard would be issued soon.

The cap on imports of HSFO has been mainly due to availability of water in the country in the wake of recent rains and the state water utility is running its power units on hydel source. This has resulted in less off-take of HSFO produced by the refineries due to which the product is in abundance.
The source said the state oil giant, Pakistan State Oil (PSO), had informed its suppliers that it could not buy theproduct due to the ban on its imports. PSO has contracted with IPG of Kuwait, Fal Oil of Sharjah, Hascombe of the UK and Glencore of Switzerland for the supply of 2.3 mm tons of HSFO under a term contract, which is going to lapse in December.

The PSO has deferred the cargoes till the resumption of imports and with the Ministry putting a cap till December, there are chances that PSO may ask the suppliers to supply the quantities as per contract whenever the imports are allowed. The source said in case the suppliers disagreed with the proposition and decided to cancel the contract, then PSO would invite a fresh tender. So far, there had been no indication from the suppliers about cancelling the contract, he said.
Under the agreement with the suppliers, PSO is to buy 2.3 mm tons of HSFO. IPG was to bring 12 cargoes at a premium of $ 14.99 per ton while the remaining cargoes would be divided equally among Fal, Hascombe and Glencore at 25 % each. In the term tender, IPG had offered to bring two cargoes eachof 55,000 tons of HSFO-170cst at $ 14.99 in every quarter while one cargo each will be brought at a premium of $ 12.94 per ton in each quarter.

Overall, three cargoes each will be supplied by IPG in four quarters. Hascombe would bring 10 cargoes each at a premium of $ 15.70 per ton while Fal and Glencore would bring 10 cargoes each at a premium of $ 15.75 per ton. The government put restrictions on the import of High Sulphur Fuel Oil (HSFO) till November owing to availability of locally refined HSFO and fall in demand in the wake of gas availability in the country.
At first the directive was issued by the ministry for the month of August, which was extended to September and on September 8 it was decided to ban the import till November.

The source said the government realised that the situation called for halting the imports of HSFO for running power plants, as there was abundance of water and surplus availability of gas. He said at present the situation was so precarious that the local refineries were producing below their capacity. Against a production of 280,000 tons of petroleum products, the sales of refineries are not touching 200,000 tons. The source said the refineries not only produce HSFO from crude oil but also other products like Jet Petrol (JP)-1, motor spirit (MS-90RON), commonly called as petrol and kerosene.
"When the refineries refine less crude oil owing to decline in the off-take of HSFO then automatically the production of petrol, JP-1 and other products will fall leading to shortages of these products," he said. "The WAPDA (Water and Power Development Authority) that used to consume 100,000 tons per month only utilised 7,200 tons in August and around 6,000-6,500 tons up to Sept. 19," he said.