KARACHI: Pakistan exported more than one million metric tonnes (MT) of furnace oil during the first seven months (July-January) of the current fiscal year 2025-26, as domestic consumption fell sharply following higher levies and structural changes in the energy mix.
According to data released by the oil sector, refineries exported 114,217 MT of furnace oil in January alone. “The export volumes reflect a growing surplus of furnace oil in the local market, where demand has steadily declined due to fiscal measures and reduced reliance on the fuel for power generation,” industry officials told The News.
In its FY26 budget, the federal government imposed a higher petroleum levy on furnace oil, along with a climate support levy. These additional charges significantly increased the domestic price of the fuel, making it less competitive than alternatives such as regasified liquefied natural gas (RLNG), coal and renewable energy sources.
Industry officials said the combined impact of fiscal levies and a policy shift towards cleaner energy sources has curtailed local consumption. “With higher taxation and climate-related charges, furnace oil has become increasingly unattractive for domestic buyers,” they said. “As a result, refineries are compelled to export surplus volumes to maintain operational continuity.”
Refineries including Pak-Arab Refinery Company (Parco), National Refinery Limited (NRL), Pakistan Refinery Limited (PRL), Attock Refinery Limited (ARL) and Cnergyico have been managing rising inventories amid weak domestic offtake. Exporting excess furnace oil has become necessary to prevent storage constraints and ensure smooth operations.
Industry representatives noted that furnace oil is a residual product derived during the refining process. Without major upgrades to refinery configurations, local refineries continue to produce substantial volumes of high-sulphur fuel oil. In the absence of sufficient domestic demand, overseas markets remain the primary outlet.
The export surge has provided limited support to the country’s external account by generating foreign exchange earnings. However, industry officials said furnace oil exports typically yield lower margins than lighter petroleum products such as diesel and petrol, as international fuel oil markets are highly competitive and subject to price volatility.
“While exports are helping to clear domestic stocks, this is not necessarily a high-value trade,” they said. “The long-term solution lies in refinery upgrades to reduce furnace oil output and increase production of cleaner, higher-demand fuels.”
Under the brownfield refinery policy, refineries were encouraged to modernise operations to improve product standards and reduce furnace oil production. However, upgrade agreements stalled after a sales tax exemption granted in the previous fiscal year created policy uncertainty, delaying the signing of agreements between the government and refineries.
