Petroleum sector im-ports have been rising. The central bank’s annual report for FY22 sheds light on the petroleum sector’s growth and performance in FY22. SBP in its annualreport highlights that the POL sector’s growth moderated amidst capacity issues and growing import of refined petroleum during FY22.
As illustrated in this space many times before, the growth in the petroleum production volume came down in FY22. The SBP annual report shows that the POL sector slowed to 0.7 percent during FY22, compared to 17.9 percent in FY21. Key factor associated particularly with the production decline in the POL sector included in the report is the inability of the refineries to upgrade to produce Euro-5 compliant fuels, which led to excess production of furnace oil that has become almost an obsolete fuel for the world and thus has low demand due to its impact on theenvironment. SBP’s analysis shows that capacity issues explained part of rising imports of refined products, as some oil refineries continue to be in the process of upgrading their plants and reconfigure production in favor of Euro-5 compliant fuels. Pakistan only started its transition to Euro5 fuel in 2020, which continues to lag
This was seen to push up the import of refined petroleum products such as petrol and diesel. As per the annual report of the central bank, the import volume of refined petroleum grew over 28 percent year-on-year, while the crude oil imports witnessed slower growth in FY22 year-on-year. Even though the country is back to using furnace oil for power generation, the earlier policy of moving towards cheaper fuels like gas, coal, and renewables and nuclear decreased the demand for furnace oil. This also created a glut for a fuel that was facing weak international as well as local demand. Despite some growth witnessed in furnace oil volumetric sales, the situation of buildup has prevailed as winter season further decreased the demand for power generation, and hence furnace oil. The central bank also points out that the situation is likely to prevail unless local refineries upgrade to crack furnace oil into refined products such as low-sulphur diesel and petrol.
On the financing side, the OMCs have been a major borrowers of short term loans in FY22. The annual report of the central bank shows that where the export-oriented sector drove short-term financing requirements, non-textile sector borrowing remained significant. And among the wholesale and retail trade that availed short term loans during FY22, borrowings were mainly done by the major oil marketing companies (OMCs) to finance the import of petroleum products. And the imports made a significant portion of the total sales that saw growth of over 14 percent in FY22. Growth in petroleum sector imports in FY22 stood over 28 percent year-on-year. However, the economic slowdown has decreased the demand for petroleum products, and hence the petroleum imports in first five months of FY23 have witnessed a decline of around eight percent year-on-year.
Comments
Comments are closed.