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Gap between local oil production and demand surging

By Muhammad Yasir

KARACHI: The production gap of local refineries is being widened to bridge the thriving demand of petroleum products, surging imports of these products and import bill of the country.

According to the refined oil production data of October 2007, released by Oil Companies Advisory Committee (OCAC), the total local refineries could only produce 3.4 million various petroleum products during July-October 2007 versus its estimated demand of 6.3 million tonnes. Particularly, the consumption of diesel and furnace oil, which recorded at 7.4 million tonnes and 7.3 million tonnes in the previous fiscal year, have been increasing substantially during the current year and it is being estimated that their demand will increase to 9.1 million tonnes and 8.1 million this year.

During the previous fiscal year, the local refineries could have capacity produce 12.8 million tonnes oil products as against the demand, which stood at 17.5 million tonnes.

Therefore, the difference was met through imports in which two-heavy weights furnace oil (FO) and diesel (HSD) constitute around 82 to 83 percent of total country’s oil imports. During the last fiscal year, the import of FO and diesel were posted 8.2 million tonnes and is expected to increase in the current fiscal year.

Analyst, Farhan Mehmood said the local demand and production gap have been increasing due to high consumption of FO and diesel in power and transport sector.

He added that difference of 5 million tonnes in local production and demand will surge to 8 million next year in the country. Hence, the oil manufacturing companies (OMCs) will have to import more petroleum products that will enhance import bill and current account deficit of the country.

Although, local refiners’ production tonnes of petroleum products is increasing but the thriving demands could only be met by new refineries., he said. The recent overhauling of Pakistan Refinery Limited (PRL) and Park-Arab Refinery Limited (PARCO) production units have enhance production of HSD & FO during Jul-Oct 2007, which was up by 21 percent and 26 percent as against corresponding months of last year respectively. But, these are deficit products as their local production meets only 47 percent and 45 percent of the local demand for HSD and FO, respectively. Hence, any variation in their domestic demand does not have any impact on production.

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