Pakistan to Save $27 Million Annually on Furnace Oil Imports with Oil Blending Facilities

Strategic Insights -

Pakistan's oil market is set to receive a boost with the Economic Coordination Committee (ECC) allowing oil marketing companies (OMCs) to establish furnace oil blending facilities. This move is expected to save the country around $27 million per annum on import costs. Currently, Pakistan imports furnace oil mainly from the Gulf region, where refineries produce high-viscose furnace oil that does not conform to Pakistan's import specifications. To meet these specifications, the oil is blended with low-quality diesel, kerosene, and other products, adding to the price and resulting in significant costs. The oil blending proposal aims to bring blending technology and socio-economic benefits, while encouraging investment in the oil industry.

Key Takeaways:

  • The ECC has allowed oil marketing companies (OMCs) to establish furnace oil blending facilities, which is expected to save the country around $27 million per annum on import costs.
  • Pakistan imports around 9 million tons of furnace oil annually, with local refineries producing about 2.5 million tons and the remaining quantity being imported.
  • The import of furnace oil in 2009-10 stood at around $3.2 billion, while the demand for last financial year 2010-11 was projected at 13 million tons worth $3.5 billion.
  • The demand for furnace oil is expected to increase to 16 million tons by 2015-16 due to upcoming new power projects.
  • The oil blending proposal aims to bring blending technology, socio-economic benefits, and employment opportunities, while encouraging investment in the oil industry.
  • The oil marketing companies involved in this proposal are Pakistan State Oil (PSO), Overseas Oil Trading Company (OOTC), and Bakri Trading Company.
  • The Hydrocarbon Development Institute of Pakistan (HDIP) and Oil and Gas Regulatory Authority (Ogra) have discussed the oil blending proposal with all oil marketing companies.

Statistics:

  • $27 million: Expected annual savings on import costs with oil blending facilities.
  • 9 million tons: Annual furnace oil demand in the country.
  • 2.5 million tons: Quantity of furnace oil produced by local refineries.
  • 13 million tons: Projected demand for furnace oil in the year 2010-11.
  • $3.2 billion: Import of furnace oil in 2009-10.
  • 13 million tons: Projected demand for last financial year 2010-11, worth $3.5 billion.
  • 16 million tons: Expected demand for furnace oil by 2015-16 due to new power projects.

Sources:

  • Pakistan State Oil (PSO)
  • Overseas Oil Trading Company (OOTC)
  • Bakri Trading Company
  • Economic Coordination Committee (ECC)
  • Hydrocarbon Development Institute of Pakistan (HDIP)
  • Oil and Gas Regulatory Authority (Ogra)