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4-Traders Homepage  >  Equities  >  KARACHI STOCK EXCHANGE (GUARANTEE) LIMITED, THE  >  Pakistan State Oil Company Limited    PSO   PK0022501016

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Fuel oil demand likely to dip half till FY2020: Platts

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12/16/2017 | 11:15am CET

Pakistans fuel oil demand is expected to fall sharply over the next three years as growing LNG (liquefied natural gas) imports help the country move to a gas-based energy economy, the worlds leading commodities markets information provider said.

Fuel oil demand is likely to drop from 9.6 million mt (metric tons) in fiscal 2016/17 to 4.5 million mt or less by fiscal 2019/20, S&P Global Platts said in a report late Thursday.

London-based Platts surveyed Pakistan State Oil, the country`s largest fuel oil importer and marketing company, and four Karachi-based brokerage houses Intermarket Securities, Foundation Securities, Topline Securities and Optimus Capital Management to reach the estimates.

We were forecasting overall fuel oil demand to witness flat growth from fiscal year 2018 to fiscal year 2020, Umair Naseer, head of research at Topline Securities told Platts. But given the governments resolve to utilise LNG for upcoming power plants, we now forecast fuel oil sales to decline from around 8 million mt in FY2018 to 4 million mt in 2020.

Pakistan consumed around 9.6 million mt of fuel oil in fiscal 2016/17, 70 percent of which comprised imports. The gradual displacement of fuel oil in Pakistan`s power sector seems inevitable as more natural gas becomes available through rising LNG imports, allowing the government to shut inefficient fuel oil-fired plants.

Currently, there are two LNG terminals with an aggregate regasifying capacity of 1.2 billion cubic feet per day (bcfd) sufficient to generate around 12,000 megawatts. A total of seven floating storage and regasification units are expected to service Pakistans mounting gas demand, according to the petroleum ministry.

LNG imports are forecast to jump over the next five years, with LNG estimating unconstrained demand at 30 million mt/year, four bcfd of gas equivalent, by 2022, which is half of the countrys total gas demand projection of eight bcfd for that year, according to government estimates. Fuel oil-based power generation reaches about 3,800 MW during the peak summer demand season. But, fuel oil will not still be completely displaced.

While LNG imports could exceed 1.8 bcfd by 2019, once the countrys third LNG terminal starts operating, most of the regasified LNG will be used to bridge the countrys existing gas deficit.

The gap between supply and demand in the countrys gas sector stands at two bcfd under the current infrastructure and policy constraints, inhibiting the free flow of gas to residential, industrial and commercial customers, and at four bcfd if those constraints disappear.

The gap could widen as domestic gas production, which is responsible for around 2,500 MW of electricity generation, falters, pipeline import projects remain uncertain, and energy consumption continues to grow among both domestic and industrial consumers.

Fuel oil imports could decline by up to 60 percent by fiscal 2019/20 as the power sector switches to gas feedstock, Fawad Khan, executive director with Karachi-based BMA Capital, said. This would result in a drop in imports from 6.6 million mt in fiscal 2016/17 to 2.64 million mt in fiscal 2019/20.

The startup of Pakistans second floating storage and regasification unit in November resulted in cutback to fuel oil-based power generation. November fuel oil sales were at 402,000 mt, down 29 percent year on year and 55 percent lower month on month.

Port stocks of fuel oil increased to 280,058 mt by late November, worth Rs41.9 billion ($39.8 million), resulting in severe import delays and demurrage costs per cargo of $15,000/day, or $105,000/week, according to the Pakistan State Oil.

Demand for fuel oil produced at local refineries using largely domestic crude could also be affected by lower downstream consumption. Current domestic fuel oil output is around 2.9 million mt/year.

In recent months, the reduction in fuel oil purchases has forced domestic refiners to lower their operating rates to below 70 percent of capacity to avoid storage tanks from brimming over, which has resulted in a draw on the stocks of other oil products such as jet fuel.

(c) 2017 Bakhtar News Agency. All rights reserved. Provided by SyndiGate Media Inc. (Syndigate.info)., source Middle East & North African Newspapers

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2015 Pearson names Williams new CFO
Financials ( PKR)
Sales 2018 937 B
EBIT 2018 29 002 M
Net income 2018 17 061 M
Debt 2018 66 740 M
Yield 2018 6,56%
P/E ratio 2018 5,74
P/E ratio 2019 5,60
EV / Sales 2018 0,17x
EV / Sales 2019 0,17x
Capitalization 90 559 M
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 9
Average target price 418  PKR
Spread / Average Target 50%
EPS Revisions
Managers
NameTitle
Sheikh Imran ul-Haque Chief Executive Officer & Managing Director
Mujahid Eshai Chairman
Yacoob Suttar Chief Financial Officer & Deputy Managing Director
Mohammad Naeem Malik Non-Executive Director
Adeel Rauf Director
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