Imports of energy decrease by 13% to $1.42 billion in November

In November 2023, Pakistan saw a 13% reduction in total energy imports, which amounted to $1.42 billion. This decline highlighted a decreased demand for petroleum, oil, and gas products due to subdued economic activities and heightened prices impacting various sectors.

The diminished demand, particularly for furnace oil used in power generation, led refineries to explore exporting opportunities. By exporting furnace oil, refineries created space to import larger quantities of crude oil, enabling the production of higher-grade products like petrol and diesel.

Data from the Pakistan Bureau of Statistics (PBS) indicated a 29% decrease in refined product imports to $499 million compared to $708 million in the same period last year. However, crude oil imports increased by 4% to $566 million from $546 million in the previous year.

The import of Re-gasified Liquefied Natural Gas (RLNG) decreased by 9%, totaling $290 million, primarily due to elevated international prices and Pakistan’s dwindling foreign exchange reserves, limiting its capacity to finance such imports.

Industries, especially the textile sector, refrained from purchasing expensive imported gas due to rising costs, impacting factory operations and overall economic activities negatively.

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An analyst attributed the decline in energy imports to sluggish economic activities and the removal of subsidies from petroleum and gas products, significantly affecting the purchasing power of a large section of society.

The lacklustre performance in large-scale manufacturing (LSM) industries, coupled with a 33-month low in electricity production in November, highlighted continued economic sluggishness.

Despite a 2.1% GDP growth in the first quarter (Jul-Sep) of FY24, analysts cautioned that this growth was influenced by specific factors such as improved agricultural output, particularly in cotton and rice. They also mentioned the low-base effect and the previous year’s economic contraction of 1% in the same quarter as contributing factors.

Experts foresee subdued energy imports and demand for related products persisting throughout the current fiscal year due to the caretaker government’s focus on stringent IMF conditions, which include tight monetary and fiscal policies, not aligning with short-term pro-growth strategies.

Looking ahead to the February 2024 elections, analysts anticipate that the next elected government may introduce initiatives to bolster economic growth, potentially increasing energy product demand by late FY24 or early FY25.

In the first five months (Jul-Nov) of FY23-24, cumulative energy imports dropped by 16% to $6.45 billion compared to $7.70 billion in the same period the previous year.

Petroleum exports surged to $44 million in November, marking a substantial 512% increase from $7 million in the corresponding month last year, as refineries, including Pak-Arab Refinery (PARCO) and Pakistan Refinery (PRL), significantly contributed by exporting furnace oil following reduced domestic demand due to the government’s shift to more cost-effective power production alternatives.