PSO signs contract with KPC for diesel

ISLAMABAD: Pakistan State Oil, the country’s largest oil supplier, has reached an agreement with Kuwait Petroleum Corporation (KPC) to purchase 3.5 million tons of high speed diesel (HSD) during calendar 2010 on 60-day credit.

PSO Managing Director Irfan K Qureshi told Dawn that the deal was finalised in Singapore last week under which the KPC would ensure guaranteed supply of 3.5 million tons of diesel on 60-day delayed payment basis during January–December 2010. The state-owned oil supplier will pay 2.7 per cent premium to KPC over and above five-day average of Platt’s Arab Gulf Mean price.

He said the PSO previous contract with KPC would expire next month under which the Kuwait’s state-owned corporation supplied high speed diesel at 2.5 per cent premium over the Arab Gulf Mean price. ‘We had to slightly increase the premium because the market is showing increasing trend,’ said Mr Qureshi. In the open market, premium normally goes beyond four per cent, he said.
He said the government, oil marketing companies and refineries usually sit together under the Product Review Committee to ascertain domestic requirement for various products on the basis of local production and imports in pipeline and if needed more imports could be made.

Pakistan’s annual diesel oil consumption is in excess of 7.5 million tons. About four million tons, accounting for more than half of the requirement, is met through imports, chiefly by the PSO. The government used to enter into long-term contracts with government-owned foreign oil suppliers till 2001 when it pulled out of petroleum business as part of the deregulation policy.

The country’s total oil consumption during the current fiscal year is estimated to rise by about 26 per cent to 24 million tons from last year’s 19 million tons. More than 70 per cent of the oil requirement is met through imports and the import bill for oil is estimated at about $11.6 billion against last year’s 9.3 billion.
Last year, PSO sold about 7 million tons of furnace oil including about 5 million tons of imported fuel oil. Besides, it also sold about 3.5 million tons of diesel.
During the current fiscal year, furnace oil import bill is estimated to go up by more than 75 per cent to about 9 million tons compared with 5.2 million tons because of higher than before reliance on thermal power production. The country’s total fuel oil consumption has been estimated at around 12.7 million tons this year compared with 8.07 million tons last year, showing an increase of 57.5 per cent. Domestic furnace oil production this year is estimated at 3.5 million tons.

The expenditure on furnace oil import would also surpass $3.42 billion or $1.47 billion higher than last year’s $1.95 billion, showing an increase of more than 75 per cent despite reduction in furnace oil prices in the international market.  Likewise, the crude oil import bill would also rise by more than 23 per cent from $4.1 billion last year to $5.1 billion this year. The government expects to import about 66 million barrels of crude oil this year compared with about 61 million barrels.

The total consumption of petroleum products including diesel, fuel oil, petrol and aviation fuel would also increase by 3.6 million tons to 13.4 million tons this year against 9.8 million tons last year. The import of these petroleum products would cost around $6.2 billion this year against $4.8 billion, up by 29pc or $1.4bn.