ISLAMABAD: The government has imposed restrictions on Oil Marketing Companies (OMCs) for import of High Speed Diesel with prior approval from oil refineries, official sources told Business Recorder. The sources said that the ex- refinery prices of petroleum products produced by the local refineries are linked with international Arab Gulf market prices of petroleum products published in Platts Oilgram.
The benchmark price, being used till December 2012 both for imported and local HSD, was 0.5 percent Sulphur HSD price published under the head of "Gasoil" in Platts Oilgram AG market. The Platts Oilgram has discontinued publication of the above price with effect from 1 January 2013 as 0.5 percent Sulphur HSD is being replaced rapidly with high quality Euro-II grade HSD of 0.05 percent Sulphur world-wide.
The sources said PSO the largest importer of HSD in the country, has already shifted its benchmark FOB price from "Gasoil 0.5 percent" to "Gasoil 0.05 percent" for fixation of import price of HSD imported from Kuwait Petroleum Corporation (KPC) with effect from 1 January 2013 under term contract. Prior to September 2012, ex-refinery price of local refineries HSD was determined and fixed by the Oil & Gas Regulatory Authority (Ogra) under the Import Parity Pricing (IPP) formula based on average prices of "Gasoil 0.5 percent" published in Platts Oil gram AG market. On 4 September 2012 the ECC approved deregulation of HSD ex-refinery price and linked it with PSO's actual import price of HSD less ocean losses.
However, in case of non PSO imports of HSD during any pricing period, the refineries fixed their ex-refinery price under IPP formula as per previous practice. Although the benchmark price for P50's import has been changed, yet the import price of HSD will be computed on discounted benchmark price ie "Gasoil 0.5 percent Sulphur". Local refineries, except Parco, are producing HSD with Sulphur contents in the range of 0.25 percent to 1.0 percent while PARCO is producing Euro-II grade of 0.05 percent Sulphur HSD. PSO's imported HSD price will be based on "Gasoil 0.5 percent Sulphur HSD" price worked out by applying discount factor of $1.70/bbl recommended by Platts Oilgram based on Singapore market prices. Therefore a mechanism formula for computation of ex-refinery price of HSD of local refineries based on AG market has been developed for consideration and approval of the ECC.
According to sources, ex-refinery price calculated by the proposed formula will be subject to a maximum of PSO's actual import price less ocean losses. It was also suggested that the proposed formula may continue till 30th June 2014 and marketing of HSD with Sulphur contents of more than 0.05 percent (Euro-II) grade HSD may be disallowed in the country as already advised to refineries or till the new refinery policy/formula for up-gradation is approved and notified. During discussion at a recent meeting presided over by Finance Minister, it was stated that the OMCs normally resort to import of HSD rather than purchasing it from the local refineries, and it was suggested that OMCs may be allowed to import HSD after obtaining a certificate from local refineries on non-availability of HSD with them. This suggestion was accepted after detailed discussion.
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