Pakistan fuel oil exports hit record high as domestic use plummets

Pakistan’s fuel oil exports surged to a record high in August, as refineries moved to clear stockpiles amid dwindling domestic demand and new government taxes aimed at discouraging consumption.

Shipments reached 182,902 metric tons in August, nearly three times higher than the 66,532 metric tons exported in the same month last year, according to data from the Oil Companies Advisory Council (OCAC).

In the first two months of the current fiscal year, which runs from July to June, exports included 252,527 metric tons of high-sulphur fuel oil and 27,537 metric tons of light-sulphur fuel oil. By contrast, during the same period in 2024, fuel oil exports totaled 182,465 metric tons, with no light-sulphur shipments.

Refineries have been increasingly forced to export fuel oil as its use in domestic power generation continues to fall. “The government has long tried to reduce the use of fuel oil in industries, especially in power plants, because electricity generated from it is much more expensive than gas, nuclear, coal, or hydropower,” said Farhan Mehmood, head of research at Sherman Securities in Karachi.

Mehmood added that exporting helps refineries free up storage space to keep producing petrol and diesel for the local market.

The shift has been accelerated by new levies introduced in the federal budget. The government imposed a tax of PKR 82,077 (USD 2,880) per ton and a carbon tax of PKR 2,665 per ton, making local use of fuel oil even less attractive, industry officials said. Refineries are now expected to export up to 90% of their fuel oil output this fiscal year.

Refineries produced 2.457 million metric tons of fuel oil in the year ended June 30, compared with 2.470 million metric tons the year before, OCAC data showed. Exports of high-sulphur and light-sulphur fuel oil in that period totaled 1.437 million metric tons.

Meanwhile, domestic consumption continues to shrink. Fuel oil use fell 76% to just 34,000 metric tons in July and August, as the share of power generated from oil-fired plants dropped below 1%, according to OCAC.

“Fuel oil is simply too expensive,” said Muhammad Waqas Ghani, a research analyst at JS Global Securities. He noted that the average cost of electricity generation from oil-fired plants is about PKR 32 per unit, compared with PKR 21.90 for RLNG, PKR 12.81 for coal, PKR 7.70 for solar, and PKR 2.20 for nuclear, citing data from the National Electric Power Regulatory Authority.