Furnace Oil Sales Jumped 740% as Hormuz Disruption Forced Pakistan Off LNG

Pakistan's furnace oil sales jumped 740 percent year-on-year in September, as disruption to Qatari LNG supplies through the Strait of Hormuz forced power planners to fall back on the country's most expensive thermal fuel for the third time since the US-Iran war began in February.

Why LNG stopped flowing as usual

Qatar Energy declared force majeure on gas deliveries after damage to facilities at Ras Laffan and renewed disruption to shipping through the Strait of Hormuz — the same chokepoint whose closure has driven oil-price volatility all year, as we've covered in our look at the war's economic spillover into Pakistan. With roughly 6,000 MW of Pakistan's RLNG-based generation fleet left largely unable to run on its intended fuel, the Power Division turned to furnace oil (FO) plants to cover the gap rather than buy replacement LNG cargoes on the spot market, where prices had reached $23-25 per million British thermal units — levels officials described as exceptionally high. Qatar had separately invoked force majeure on its winter supply contract with Pakistan in September, so this is not the first time the relationship has strained this year.

How much furnace oil is now running

Pakistan is generating at least 800 MW from furnace oil during peak evening demand, between 5pm and 1am, out of roughly 1,400 MW of installed FO capacity — plants that had largely sat idle for years as the country shifted toward gas, coal, hydel and solar. This is the third time since February that the government has leaned on furnace oil to avoid spot LNG purchases, after similar moves in August and again in September.

What it costs, and who pays

Furnace oil-based generation cost around Rs33 per unit in October, compared with roughly Rs21 per unit for LNG-based plants — a gap of Rs12 per unit on every unit shifted to the dirtier, costlier fuel. CPPA-G has asked NEPRA to approve a fuel charges adjustment of Rs4.75 per unit for October to recover the higher generation cost, a request officials estimate would add about Rs60 billion to consumer bills if approved as filed. That would follow a run of consecutive monthly fuel adjustments dating back to around May, including the Rs1.73 per unit increase NEPRA reviewed for August's costs — meaning October's request would be larger still. The Federation of Pakistan Chambers of Commerce and Industry has called for the government to suspend the petroleum levy (Rs77 per litre) and carbon levy (Rs2.5 per litre) on furnace oil, which together add roughly Rs84,742 per metric ton to the fuel's cost, arguing the power sector is under severe strain from the LNG disruption without added tax pressure on the fallback fuel.

Why this keeps recurring

The fuel charges adjustment mechanism exists precisely to pass the gap between planned and actual generation costs on to consumers with a lag, a structure meant to protect the sector's finances from accumulating into circular debt, which we've explained separately. But it also means that disruptions far outside Pakistan's control — a war in the Gulf, a shipping chokepoint half a continent away — translate into higher bills within one or two billing cycles, layered on top of the load-shedding pressures many consumers already navigate, covered in our piece on the subject.

What happens next

NEPRA has not yet scheduled a public hearing date for the October fuel charges adjustment request, and whether the Rs4.75 per unit figure survives scrutiny — as past requests have sometimes been trimmed — remains to be seen. For now, the mechanism by which Gulf shipping disruptions reach a household's electricity bill is the same one driving pump prices and currency pressure elsewhere in the economy this year: a chokepoint thousands of kilometres away, showing up in Pakistani rupees within weeks.

Build Better Pakistan's Energy Desk tracks NEPRA tariff decisions, fuel supply disruptions and their effect on household electricity bills.