Govt restricts furnace oil exports

The government may collect revenue of Rs75 billion on estimated consumption of around 0.9 million tons (950 million litres) of furnace oil during the outgoing fiscal year 2024-25. photo: file

ISLAMABAD:

The government has tightened control over the export of furnace oil following oil supply disruptions in the face of US-Israel-Iran war.

It has asked oil refineries to seek prior approval from the Prime Minister's Committee on the Monitoring of Petroleum Prices for the export of furnace oil. The Ministry of Energy (Petroleum Division) has informed the Oil and Gas Regulatory Authority (Ogra) that the PM committee has decided that in view of the emerging regional situation in the backdrop of US-Iran conflict, the export of furnace oil will be undertaken only after obtaining prior approval from the committee.

"I am directed to refer to the subject and to say that as decided in the meeting of the Prime Minister's Committee on the Monitoring of Petroleum Prices any export of furnace oil shall be undertaken only after prior approval of the PM committee," the Petroleum Division said. Recently, the international oil market has become highly volatile due to a major geopolitical conflict affecting shipping through the Strait of Hormuz. This strait is of critical strategic importance to the world energy market as 20% of global oil supplies pass through this corridor with limited alternatives.

Therefore, even short-term disruptions can trigger supply delays, increased freight costs, high risk premiums and sharp price movements, particularly for import-dependent Asian economies having limited short-term sourcing alternatives.

Pakistan's fuel supply remains significantly dependent on Gulf Arab-linked imports. During the first eight months (Jul-Feb) of the current fiscal year, Pakistan imported 3.6 million metric tons (70%) of motor spirit (petrol) and one million metric tons (21%) of high-speed diesel (HSD) against domestic consumption of 5.2 million metric tons of petrol and 4.8 million metric tons of HSD. The Strait of Hormuz has been experiencing an effective blockade since February 28, 2026. Additionally, attacks on Middle Eastern oil installations have led to a sharp increase in free-on-board (FOB) prices over the last two days (HSD by 34% to $118.51 per barrel and motor spirit by 27% to $90.02 per barrel), which translates into a substantial price spike for petroleum products so far.

Freight rates for Gulf Arab crude and product tankers have also surged as transit through the Strait of Hormuz slowed down following US-Israel strikes on Iran, with industry bodies advising vessels to avoid the region or exercise heightened caution.

Energy price and transaction information provider Platts has assessed the freight rate for transporting 90,000 metric tons of refined products from the Persian Gulf to the UK/continent at $68.89/MT, up 19% day-on-day and 44% since the start of the year.