Through my various Business Recorder columns, I have raised a point about our depleting oil reserves strategy that was slashed in FY 2008-09 to half or 3-week's availability to meet domestic demand. Last time I mentioned about Pakistan Strategic Petroleum Reserves was on December 18, 2014 in BR titled (Pakistan Should Hedge half of its Future Oil Purchases) that again went unnoticed.
Today Pakistan is faced with a severe oil shortage due to numerous factors. Everyone is clueless about what caused oil shortage in the country. There could be numerous factors responsible for the present oil deficit. Mismanagement, pricing factor, funding shortage, greed for more profit due to continued falling oil prices in international market.
Circular debt is certainly the mother of all ills. In a broader perspective funding that includes rupee and foreign exchange is the obvious factor to meet the IMF targets for 4th and 5th tranche is the spoiler of the game. Circular debt adjustment/reduction by December end would have meant a rise in fiscal deficit. Purchase of oil to fill storage tanks for a three-week period would also have meant oil payment through foreign exchange that risks missing out the promised USD 15 billion foreign exchange reserves target.
I am extremely surprised and what frightens me is that no one, not even defence analysts, have ever discussed the security aspect and the risks faced by the country by having mere 3 weeks of oil reserves. In past I avoided discussing openly due to external risk factor. But I cannot keep my mouth shut forever, as the country is fully exposed and our borders are brittle from all three sides.
Talking more about the strategy, India's commercial storage of crude and petroleum product at any given time is of 70-day's needs against its daily consumption of 3.2 million barrels. China is building up to its strategic oil reserves regularly and during this decade they have stored 170 million barrels of oil reserves, as it consumes 9.5 million barrels per day. USA during two decades has increased its strategic reserves to nearly 727 million barrels, which is the largest stockpile of crude oil in the world. Its daily oil consumption is 19 million barrels.
It is evident that there is a lack of vision in our leaders, as they should have known the risk/importance of having oil storage to meet any unusual circumstances. For nearly 5 1/2 years Pakistan strategic oil holding was good for 18-20 days. Recently, Pakistan's oil minister made a statement that Pakistan now producing nearly 100,000 barrels of oil against total demand of nearly 415,000 per day. For record purpose Bangladesh and Sri Lanka's daily need is 105,000 and 95,000 per day, respectively. Hence, the government should realise the strategic importance of oil storage. This is a wake-up call and increase in oil reserves should be on top of its priority list. To get rid of this strategic oil blunder they are required to take advantage of cheaper oil availability to reform and revamp the energy sector and fill their tanks with a view to ensuring a minimum 12-week oil reserves.
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