Overview and challenges faced by supply chain management in oil marekting business in a challenging environment FAROOQ YAZDANI DAR, General Manager Supply and Logistics, Bakri Pakistan

A country with healthy balance of trade always guarantees foreign investments, economies of scales and opportunities for employment in the domestic economy. Pakistan is one of those under privileged countries facing trade deficits and relying majorlyon imports to run the industrial wheel of the country. Nevertheless, decline in international oil prices has aided Pakistan to great degree not only in reducing the cost of import but the forex exchange reserves of the country have improved.
Although this decline has hit cash inflow of major oil exporting countries at the same time it is sigh of relief for Pakistani consumers due to domestic price reduction which was not entirly passed to the consumers yet it is quite encouraging compared to the West where oil prices are comparatively higher.
Oil contributes 36 per cent of Pakistan's total import bill, which is the highest of total imports made into Pakistan. Oil is imported in two forms, (1) Raw crude oil and (2) refined petroleum. Crude oil is imported by the refining sector whereas refined products are directly imported and marketed by the Oil Marketing Companies (OMC's).
Current oil reserves available for exploration are not sufficient to cater the entire energy needs of the country hence deficit of crude oil requirement is met through imports by the indigenous refining sector,however the deficit still remains due to very high demand from the consumer market, which is overcomedirectly by the individual OMC's import of refined petroleum products. This is the most challenging and an exceptional obligation carried out by the OMC's as the entire pressure of the supply / demand deficit is handled by these companies which own significant infrastructure and trade lines with the GCC and far eastern countries.
Not too far away and just a year back following fiercely dwindling international oil prices led to increased demand of Motor Gasoline in the country resulting in very low stock level especially in the major cities neverthelessthis crises was meticulously managed by all OMC's to overcome in shortest possible timeframe. Nonetheless, even now when the prices are tumbling, the current stocks position in the country is more than satisfactory due to sustainable imports of petroleum products by the OMC's.
Import of Petroleum Products - Challenges
The import of refined petroleum is exceedingly challenging task especially for smaller and newer OMC's. Major impediments include:
(1) "A penny saved is a penny earned"Fiercely declining international oil prices results in significant inventory losses on stocks carrying by the OMC's whereas OMC's endeavour to maintain sustainable stocks to provide sustainable supplies to their consumer network. Recent drop in oil prices has almost wiped off all OMC's profits but the supplies to consumer market were never compromised.
(2) "Actions speak louder than words"Extraordinary insufficient storage facility along the coastal areas of Pakistan where the ships carrying bulk of imported petroleum product dock. Under the ban from the Defense sector on further construction of storage infrastructure near Keamari port, Bakri Pakistan has gone extra mile by proposing to construct state of the art motor gasoline storage terminal near Port Qasim. Bakri Pakistan already has more than the capacity of 120,000 MT's storage in the same vicinity of Diesel and Fuel Oil to cater the energy needs of country's Power sector. This new addition of motor gasoline storage worth 26,000 MTs will shift motor gasoline shipments from Keamari Port to Port Qasim to dock at Fauji Oil Terminal jetty. This will also diminish the influx of trucks / bowsers carrying dangerous petroleum products into the residential sectors of Karachi. Entire oil industry has already appreciatedBakri'sinitiative and the new storage at Port Qasim is expected to complete during the second half of this calendar year.
(3) "Fortune favours the bold"Complexity in the current structure of import price mechanism the greatest challenge faced by the importer OMC's. OMC's have proposed various options to the authorities to revisit the mechanism and are hoping that the fair opportunity will be granted to encounter this impending matter which will transfer benefit to consumers and attract further foreign investments in the country. Nevertheless OMC's at the same time have accepted this great challenge with zeal.
(4)"Good things come to those who wait."The greatest of all challenges faced by the industry is the impact of foreign exchange and ocean losses. Pakistan has seen devaluation of local currency. Normally the governments devalue their currency to boost the export industry to make exports more competitive and appear cheaper to foreigners. This increases the demand for exports. However due to trade deficit,devaluation in Pakistan results in imports to become more expensive resulting in loss on import of petroleum products. But the irony for all OMC's is that this impact of revenue loss cannot be includedin the computation of the fuel price build-up resulting in huge losses for all importing OMC's. Nevertheless in spite of this unpleasant element of oil imports, the OMC's have still shown sustainability in oil imports to ensure all time availability of fuel across the country.
Over the past 5 years, country's motor gasoline demand has increased by 240%which has put load on imports with minor increase in the local refinery production. This has also put enormous pressure on the existing Oil Piers at Keamari Port Trust. The motor gasoline vessels calling at Keamari have to wait for their turn to berth and result in demurrages. Cognisant with this fact, the OMC's have yet again ensured sustainable imports in spite heavy demurrages for not being able to berth their motor gasoline vessels upon arrival. As stated in the above para OMC's are not allowed to add cost of foreign exchange and ocean losses, similarly OMC's cannot also add the demurrage cost in the price build-up of imported products which erodes the bottom line of the balance sheet.
Pakistan is blessed with priceless talent and the human resources of this country have proved worth in all walks of life from education to sports sector and more. Even the petroleum industry of Pakistan is consecrated with faithful and talented professionals. It is this team of professionals from the very same industry which has demonstrated constructive approach to aforesaid challenges and time has come when these challenges and difficulties faced by the industry must be considered for an immediate resolution. The honourable authorities are well acquainted with the above narrated challenges and reassurances have also been given to the OMC's for resolution.