Pakistan experienced a 13% decline in overall energy imports, reaching $1.42 billion in November 2023, shedding light on subdued demand for petroleum, oil, and gas products. Economic activities remained lackluster due to sluggish growth, and the recent surge in product prices has hampered purchasing power across various sectors.
Refineries looked into export options as a result of the declining demand for their goods, especially furnace oil, which is used to produce electricity. Refineries were able to acquire bigger amounts of crude oil by exporting furnace oil, which freed up space for them to make premium products like gasoline and diesel.
The most recent data available from the Pakistan Bureau of Statistics (PBS) shows that imports of refined products fell by 29% to $499 million in November from $708 million in the same month the previous year. In the meantime, imports of crude oil rose by 4% to $566 million in May of this year from $546 million in the same month last year.
Re-gasified liquefied natural gas (RLNG) imports fell by 9% to $290 million. This was mostly because of high global costs and the nation’s declining foreign exchange reserves, which made it difficult for it to finance these imports.
Major Players in the Industry
Major players in the industry, such as the textile sector, showed reluctance to buy pricey imported petrol because of the escalating expenses, which rendered it unfeasible to maintain factory operations and overall economic activity.
A prominent expert ascribed the reduction in energy imports to sluggish economic activity as well as the elimination of subsidies for petrol and oil products, which had a substantial effect on the purchasing power of a considerable portion of the populace.
Despite achieving a GDP growth of 2.1% in the first quarter (Jul-Sep) of FY24, analysts caution that this growth is influenced by specific factors such as improved agricultural output, particularly in cotton and rice. The low-base effect and the contraction of the economy by 1% in the same quarter of the previous year further contribute to the perceived turnaround.
Proper Financing vital for just Energy Transition
Experts predict that energy imports and demand for related products are likely to remain subdued throughout the current fiscal year. The caretaker government’s focus on implementing stringent International Monetary Fund (IMF) conditions, including tight monetary and fiscal policies, does not align with pro-growth strategies in the short term.
Anticipating more growth-friendly policies following the February 2024 elections, analysts believe that the next elected government may spearhead initiatives to boost economic growth and subsequently increase demand for energy products by late FY24 or early FY25.
In the first five months (Jul-Nov) of the current fiscal year 2023-24, cumulative energy imports witnessed a 16% decline, amounting to $6.45 billion compared to $7.70 billion in the same period the previous year.
Petroleum Exports Surge
PBS data shows that Pakistan’s petroleum product exports reached $44 million in November, up 512% from just $7 million in the same month the previous year.
According to recent developments, boiler oil was mostly exported by petroleum refineries when local demand fell to just 10% of daily production, which ranged from 5,000 to 6,000 tonnes. This decrease came about as a result of the government’s determination to reduce the amount of electricity produced by oil-producing facilities in favor of more affordable options like nuclear and hydel power.
Of the five refineries that are now in operation in the nation, prominent ones like Pakistan Refinery (PRL) and Pak-Arab Refinery (PARCO) contributed significantly to the export of furnace oil.