Energy imports fell 13% to $1.42 billion in November

KARACHI:

Pakistan saw a 13% drop in total energy imports to $1.42 billion in November 2023, shedding light on sluggish demand for oil, petroleum and gas products. Economic activities remained lackluster due to sluggish growth and the recent rise in commodity prices hampered purchasing power in various sectors.

Falling demand for products, particularly furnace oil used in power generation, has prompted refiners to explore export opportunities. By exporting furnace oil, refiners created scope to import larger quantities of crude oil, which, in turn, allowed them to produce high-quality products such as gasoline and diesel.

According to the latest data from the Pakistan Bureau of Statistics (PBS), imports of refined products plummeted by 29% to $499 million in November compared to $708 million in the same period last year. Meanwhile, crude oil imports rose 4 percent to $566 million, from $546 million in the same month a year earlier.

Imports of Regasified Liquefied Natural Gas (RLNG) fell 9% to $290 million, largely due to increased international prices and the country’s shrinking foreign exchange reserves, which hamper its ability to finance such imports.

Industries, including major players such as the textile sector, have shown reluctance to buy expensive imported natural gas as rising costs have made it economically unviable to sustain plant operations and overall economic activities.

A leading analyst attributed the decline in energy imports to both sluggish economic activities and the withdrawal of subsidies from oil and gas products, significantly affecting the purchasing power of a large section of society.

The weak performance in large-scale manufacturing (LSM), combined with a 33-month low in electricity production in November, underscores the continued sluggishness in economic activity.

Despite achieving GDP growth of 2.1% in the first quarter (July-September) of 2014, analysts warn that this growth is affected by certain factors such as improvement in agricultural production, particularly in cotton and rice. The low base effect and the economy shrinking by 1% in the same quarter last year further contribute to the perceived recovery.

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Experts predict that energy imports and demand for related products are likely to remain sluggish throughout the current financial year. The caretaker government’s focus on implementing strict International Monetary Fund (IMF) conditionality, including tight monetary and fiscal policies, is not aligned with pro-growth strategies in the short term.

Anticipating more growth-friendly policies after the February 2024 election, analysts believe the next elected government may spearhead initiatives to boost economic growth and then boost demand for energy products by the end of 24 or beginning of the 25th year.

In the first five months (July-November) of the current financial year 2023-24, cumulative power imports fell 16% to $6.45 billion compared to $7.70 billion in the same period last year.

Increase in Oil Exports

According to PBS data, Pakistan’s exports of petroleum products rose to $44 million in November, a 512 percent increase from just $7 million in the corresponding month last year.

Recent developments reveal that oil refiners mainly exported furnace oil after domestic demand fell to just 10% of daily production, ranging from 5,000 to 6,000 tonnes. This decline followed the government’s decision to curtail electricity generation from oil-fired plants, opting for more cost-effective alternatives such as hydel and nuclear power.

Leading refineries such as Pak-Arab Refinery (PARCO) and Pakistan Refinery (PRL) have played a major role in the export of furnace oil among the five refineries currently operating in the country.

Published in The Express Tribune, December 22^n.d2023.

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