SINGAPORE (Reuters) - Pakistan State Oil (PSO) has suspended imports of fuel oil after an abrupt drop in domestic demand as the country turns to liquefied natural gas (LNG) to fuel its power sector, two company officials told Reuters on Wednesday.
It is not clear how long the suspension will last but the country’s state-owned oil importer is expected to drastically cut fuel oil imports, one of the sources said, speaking on condition of anonymity as he was not authorised to speak with media.
“It’s difficult to see demand (for fuel oil) recovering especially with two more LNG terminals coming up,” the source said.
Pakistan built its first LNG import terminal in 2015 and a second terminal started up last month. Two more LNG import projects are expected to become operational in 2018.
PSO’s fuel oil sales were down 9.4 percent in the third quarter of this year from the same period last year while its LNG sales grew by nearly 50 percent due to higher utilization of LNG in the power sector, according to PSO’s financial results in October.
“Fuel oil imports will have lower priority while LNG will be the main priority of the country,” the second company source said.
Pakistan’s Petroleum Minister Shahid Abbasi had told Reuters earlier this year that Pakistan could become one of the world’s top-five buyers of LNG with imports topping 30 million tonnes by 2022, up from just 4.5 million tonnes currently.
PSO had issued a tender last month to import 565,000 tonnes of fuel oil for late December to January delivery, which it later cancelled, said two fuel oil traders.
Deliveries of November and December fuel oil cargoes have also been deferred, they added.
This year, PSO imported about 400,000 to 650,000 tonnes of fuel oil a month, on average.
Pakistan’s lower fuel oil demand, most of which is delivered from the Fujairah oil hub in the United Arab Emirates, has driven stocks of the fuel this week to a more than four-month high.
Reporting by Jessica Jaganathan and Roslan Khasawneh, additional reporting by Oleg Vukmanovic; Editing by Christian Schmollinger