Pakistan's oil refiners set to export 185,000 mt of fuel oil in August

Pakistan's oil refineries have received regulatory approval to export about 185,000 metric tons of fuel oil in August, while maintaining adequate strategic reserves to meet the needs of the country's domestic power generation sector, according to notifications from the Oil and Gas Regulatory Authority seen by Platts.

OGRA has approved fuel oil exports of 50,000 mt for Pak-Arab Refinery Co., 45,000 mt for Cnergyico Pk. Ltd., 40,000 mt for Pakistan Refinery Ltd. and 50,000 mt for National Refinery Ltd., according to separate notifications dated Aug. 12 seen by Platts on Aug. 19.

The approvals were subject to the refineries maintaining strategic reserves sufficient to meet the power sector's requirements, according to the notifications.

Pakistan's oil refineries exported about 1.453 million mt of fuel oil in fiscal year 2025-26 (July-June), up from about 1.3 million mt the previous year, according to data from Karachi-based Oil Companies Advisory Council.

Pakistan also exported 180,469 mt of low-sulfur fuel oil in FY 2025-26, up from 137,880 mt a year earlier, OCAC data showed.

Structurally weak domestic demand for furnace oil led to significant surpluses at older refineries, which boosted exports, according to multiple industry sources.

Aging refineries face surplus

Pakistan's refining sector is facing mounting pressure as domestic demand for furnace oil continues to decline, while older simple refineries retain relatively high fuel oil yields, according to a report by Karachi-based brokerage Arif Habib Ltd. seen by Platts.

The aging hydroskimming refineries produced furnace oil equivalent to about 21% of total refinery throughput in FY 2025-26, creating persistent surplus volumes that need to be exported, often at discounted international prices, AHL said in a note.

This has weighed on refiners' profitability, particularly as domestic policy measures have further reduced furnace oil's competitiveness, AHL added.

Pakistan's government has actively discouraged the use of fuel oil or furnace oil for power generation over the last two years, favoring cheaper, cleaner alternatives such as gas and renewables.

LNG supply crunch buoys fuel oil-powered utilities

Pakistan's fuel oil-fired power generation surged in July as disruptions to LNG supplies from Qatar amid the ongoing conflict in the Middle East reduced feedstock for gas-fired power plants.

Electricity generation from fuel oil-fired power plants nearly doubled year over year to 215 gigawatt-hours in July, from 108 GWh in July 2025, said Bazif Memon, research analyst at Karachi-based stock brokerage and financial advisory company Optimus Capital Management. Fuel oil-fired power generation totaled about 100 GWh in June, OCM data showed.

"Due to the disturbance in the Middle East, LNG cargoes from Qatar reduced sharply," Memon told Platts on Aug. 19, adding that the supply disruptions have forced the government to operate fuel oil-fired power plants instead of relying on regasified LNG.

Only five LNG cargoes arrived in Pakistan in July, compared with 10 vessels in July 2025, Memon said.

The increased use of fuel oil for power generation has provided some temporary near-term support to domestic demand, but refinery production continues to outpace structural consumption, according to local market sources.

Asian market fundamentals

The Asian high-sulfur fuel oil market remains well supported by persistent supply tightness, as prolonged uncertainty over Strait of Hormuz traffic has disrupted oil flows from the Middle East in recent months, pushing downstream bunker premiums higher in recent weeks, according to trade sources.

Platts, part of S&P Global Energy, assessed the Singapore 380 CST HSFO cargo's cash differential to the Mean of Platts Singapore 380 CST HSFO assessment at a premium of $33.39/mt at the Aug. 19 Asian close, its highest level since May 6, when it was assessed at a premium of $38.98/mt.

Singapore imported 92,459 mt of fuel oil from Pakistan in June, but there have been no arrivals from the South Asian country in July and so far in August, according to Enterprise Singapore data compiled by Platts.

The Asian HSFO market remains tight, but some trade sources expect that as the summer power-generation demand season gradually winds down, it will likely free up some supplies, potentially helping cool fundamentals over the coming weeks.