Pakistan's gasoline demand is expected to show strong growth over the next couple of years, forcing the country to boost its imports of the auto fuel.
According to estimates from the petroleum ministry, gasoline demand is expected to grow by 15% year on year to 5.3 million mt (around 39.5 million barrels) in fiscal 2015-2016 (July-June) led by low prices, non-availability of compressed natural gas and a rise in auto sales.
In 2016-17, demand is expected to rise 11% on the year to 5.9 million mt, government officials estimated.
"To compete effectively in the market and ensure timely product availability, PSO has to import more Mogas in the coming years in view of the expected increase in demand," Sheikh Imranul Haq, managing director of Pakistan State Oil, told Platts Wednesday. PSO is the largest oil marketing and distribution company in Pakistan.
"Currently we are importing on average three cargoes per month, but this can go up to four or five by next year," he said.
Of the 4.6 million mt of gasoline Pakistan consumed in the fiscal year ended June 2015, only 1.5 million mt was produced domestically, with the remaining 3.1 million mt, or 67% imported, according to ministry data.
Pakistan is one of the few countries in the region that consumes 87 RON gasoline.
Though Pakistan is expected to see an increase in domestic gasoline output next year, this will not be enough to compensate for the rise in demand.
The 46,000 b/d Attock Refinery will lift its gasoline production from 30,000 mt/month to 50,000 mt/month by March 2016, while the 50,000 b/d Pakistan Refinery has already doubled gasoline production from 11,000 mt/month to 22,000 mt/month.
"Since refinery production is not expected to increase drastically, PSO will have to rely on imports," Haq said.
KEY FACTORS
Lack of availability of CNG led by stagnant domestic production and delays in LNG imports has been a major factor driving up gasoline demand in the country.
Natural gas production in the country has been at standstill at 4.2 Bcf/day over the past two years, while demand has risen substantially.
The CNG sector needs around 450,000 Mcf/d of gas to meet demand, but owing to lack of gas availability and diversion to residential customers, gas supply to CNG pumps ranges between 380,000 Mcf/day to 400,000 Mcf/day, Ghaiss Abdullah Paracha, chairman of the All Pakistan CNG Association said by telephone from Islamabad.
Additionally, a substantial decline in product prices has led to increased usage of both high speed diesel and gasoline over the past one year.
The retail price of gasoline has fallen to Pakistan Rupees 77 ($0.6)/liter from Rupees 114/liter in November 2014 following the sharp drop in international crude oil prices.
"The surge in oil consumption hinged around the global crude price. However, the trend and international developments like OPEC maintaining the crude oil supplies indicate that low domestic price would stay for long," said Nauman Ahmad Khan, head of research at Karachi-based brokerage house Foundation Securities, adding that rising vehicle sales would also help consumption over coming years.
During the fiscal year ended June 30, 2015, car sales recorded growth of 31% year on year to 179,953 units. And in the four months to October 2015, sales shot up 67% year on year, said Muhammad Tahir Saeed, senior research analyst at Karachi based brokerage house Topline Securities.
LNG AN OPTION
Some industry officials, however, said that the growth in petroleum products demand might not be as much as estimated by the government as CNG pump owners have successfully lobbied the government to import LNG independently, instead of depending on the state run companies Pakistan State Oil and Sui Northern Gas.
"We have received a nod from the government to import LNG independently. Following the arrival of LNG, CNG [supply will be restored]," Paracha said.
"We are on a fast track basis holding meetings with companies in Qatar and we expect to finalize a deal to bring LNG soon," he said.
Pakistan's overall oil products demand in 2014-15 period was 22 million mt, up from 21.44 million mt the previous year. In the year ending June 30, 2016, consumption is expected to rise to 22.8 million mt, while in the year ending June 2017 it would rise to 23.5 million mt, government officials estimated.
