Ogra urged to probe impact of smuggled fuels

ISLAMABAD: The country’s oil industry has urged the Oil and Gas Regulatory Authority (Ogra) to thoroughly investigate the adverse impact of smuggled fuel discounts on the oil industry to be addressed by law enforcement agencies to prevent losses to both the exchequer and the industry.

These and other unfair marketing practices in the local oil industry were highlighted in a letter to Masroor Khan, Chairman Ogra written by Zeeshan Tayyeb, Chief Operating and Financial Officer, Gas and Oil Pakistan Limited (GO).

He reminded Chairman OGRA that as Pakistan remains a net importer of both crude oil and refined products; our domestic refineries are reliant on imported crude to sustain operations. Despite the introduction of high standards such as EURO-V for imported gasoline and gas oil, our local refineries continue to produce below these specifications, with no clear timeline for nationwide compliance with the government’s elevated standards.

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“It is crucial to note that refineries establish supply agreements with Oil Marketing Companies (OMCs) and typically decide on volumes to be distributed bi-monthly. Many refineries have longstanding relationships with older OMCs, influenced by either ownership or historical ties. It is observed that during periods of rising prices, refineries prioritise their established partners, whereas in a declining price environment, they seek to distribute their allocations to other OMCs with whom they have limited or no prior relationships. Refineries have attempted several bans on the import of refined products to ensure local refinery utilisation,” said Zeeshan Tayyeb.

Highlighting M/s GO, Zeeshan Tayyeb reiterated that Gas and Oil Pakistan Limited has consistently utilised its allocated products from local refineries before seeking import approvals, maintaining an uninterrupted local supply chain. The approvals granted to M/s GO by OGRA for May and June represent approximately seven days of sales for the company or less than one day’s industry sales nationwide. For July, this represents less than three days of sales for the industry.

“With a network of over 1,200 outlets, nearly double the number since the COVID era, GO is committed to fully servicing its network, which has faced operational challenges due to liquidity issues from government receivables related to sales tax, freight, and forex losses. However, with some receivables now released and a landmark investment from Aramco, GO is poised to reclaim its market share and secure supplies for its 1,200 retail outlets,” he said.

“M/s GO’s imports are in line with the benchmark price of PSO, ensuring no additional cost to the exchequer. In comparison, the terms of supply from local refineries are significantly less competitive than those offered by imports from KPC or Aramco,” he continued.

According to the letter Aramco’s investment in the sector, the first by any Saudi Arabian company, promises enhanced energy security and market improvements that will benefit consumers in the long run. This development will also necessitate adjustments from local players as GO reclaims its market position.

Copyright Business Recorder, 2024