KARACHI: Repeated decisions of Oil and Gas Regulatory Authority (Ogra) to permit additional HSD imports amidst already high HSD stocks, citing the upcoming turnaround of Pakistan’s largest refinery and the agricultural season as justifications, is utterly unfounded and irresponsible, Oil Companies Advisory Council (OCAC) said.
If Ogra’s assertions held any merit, refineries should currently be operating at optimal throughput and not resorting to renting additional storages, it added.
The OCAC said refinery maintenance turnarounds are meticulously planned, with stock levels strategically calculated for supplies during the shutdown period. This planning has been thoroughly coordinated with Ogra through multiple meetings, and no credible justification was identified for approving additional HSD imports, especially when the country already holds over 45 days of HSD stocks. Furthermore, since April 2024, refineries are renting additional storage facilities for HSD, further increasing their financial burdens.
Slow HSD upliftment: Ogra rejects allegations of OMCs
A quick review of the facts can help understand the situation. The average monthly HSD sales, including seasonal demand, in FY 2023-24 have been 520 KT. OGRA’s claim that lower sales are solely due to price trends is baseless. Sales have consistently declined since 2023 due to low economic activity and unabated cross border movement, with no significant increase in HSD demand outside the agricultural season. Even during the April-June 2024 agricultural season, the average monthly sales reached 551 KT, without any need for additional imports beyond those supplied by PSO, as refineries could meet the country’s demands by supplying ~400 KT HSD per month, it added.
According to OCAC the influx of HSD from cross-border sources has already undermined the local demand, and without controlling this influx, the rationale for further imports is weak and detrimental to local refineries. These concerns have been consistently raised in Product Review Meetings (PRM) and recorded by Ogra in the Minutes of Meeting effective April 2024 through July 2024, stating that the country is facing high stocks position, low sales and it is important to accommodate local refineries, facing ullage constraints, through rationalization of imports.
Additional HSD import approvals for a specific OMC were granted in June (15 KT), July (15 KT), August (40 KT) and the product has already been discharged. Further import approvals for 38 KT HSD were granted for September 2024. The cargo arrived on August 30, 2024, and is pending discharge. The September import laycan (laydays commence and cancelling date) was known to the regulator at the time of the PRM (held in 1st FN August 2024). In the absence of Minutes of Meeting from OGRA, any statement suggesting the arrival timing of this cargo during September end lacks merit, it added. “OGRA’s repeated advice for refineries to compete on commercial terms with the International Market effectively means yielding to unjustified commercial conditions imposed by the specific OMC. PSO imports HSD under a long-term G-2-G contract and cancels cargoes to support refineries in the wake of rampant smuggling and depressed sales; similarly, imports by other OMCs should be out rightly discouraged. It also goes to prove that linking unjustified additional imports with any refinery shutdown is mere face-saving. Ogra’s statement of keeping flexibility in allowing additional imports applies only to Motor Gasoline, not HSD.”
While Ogra holds the ultimate responsibility for granting import approvals, such decisions should prioritise the National Oil Supply Chain’s integrity. Excessive imports are resulting in unfair market practices, including substantial discounting without any consumer benefit. Prioritising unnecessary imports over refinery upliftment exert undue pressure on Pakistan’s foreign exchange reserves, especially given the current economic challenges. The oil industry, including refineries, expresses deep concern and dissatisfaction with the current situation, which fosters unfair competition and negatively impacts the industry. The industry urges Ogra to intervene promptly and decisively to resolve this critical issue, OCAC said.
Copyright Business Recorder, 2024