OGRA may get powers to regulate oil demand, supply

Issue under consideration after petrol shortages in January last year

ISLAMABAD:

The government is likely to hand over powers to the Oil and Gas Regulatory Authority (Ogra) for regulating and monitoring the demand and supply of oil in the country’s market.

The matter is being reviewed following crippling petrol shortages in Punjab in January last year that led to suspension of several top officials of the Ministry of Petroleum and Pakistan State Oil (PSO) - the state-owned oil marketing giant.



Those suspended from service included the petroleum secretary, additional secretary petroleum, director general oil, PSO managing director and other top officers of the company. Over one year has passed, but the director general oil and senior PSO officials have still not been reinstated.

At present, the director general oil of the petroleum ministry has powers to regulate oil and gas supply in the country. The director general oil heads a review committee that meets every month to assess the oil demand from consumers across the country.

The petrol crisis erupted despite persistent warnings by the then acting chief of PSO, Amjad Pervez Janjua, that the country could face acute shortages in the near future. He also sought financial assistance from the Ministry of Finance, but was rebuffed on many occasions.

Janjua wrote a letter to the petroleum secretary on December 24, 2014 warning of “an imminent supply chain breakdown”, followed by another letter on December 30.

Now, the Ministry of Petroleum and Natural Resources is going to seek consent of the cabinet to transfer powers from the ministry to Ogra for regulating and monitoring the demand and supply of oil.

During the oil crisis of January 2015, the government had also sent Ogra chairman on forced leave, but the court restored him on the grounds that it was not the role of Ogra to regulate and monitor oil supply.



According to a senior government official, bulk of the regulatory functions in the downstream sector - oil refining and processing - had already been shifted to Ogra in February 2006 with approval of the cabinet. However, policy issues remained with the petroleum ministry.

Things like management of inland freight equalisation margin (IFEM) and determination of monthly oil demand and supply remained under the control of the petroleum ministry keeping in view Ogra’s lack of expertise.

Subsequently, in a phased manner, the IFEM management was transferred to Ogra in 2008, which was approved by the Economic Coordination Committee on July 30, 2008.

However, the monitoring of demand and supply of petroleum products has yet to be transferred to the regulator. The ministry was of the view that the subject fell within the purview of Ogra under the Ogra ordinance whereas the federal government could issue policy guidelines to the regulator for the marketing of refined petroleum products.

Since the monitoring of refined oil product marketing is a regulated activity that belongs to Ogra and all oil marketing companies and refineries have got licences from Ogra, the regulator would be in a better position to regulate this function keeping in view the strength and skills gained over the past 10 years.

Published in The Express Tribune, February 18^th,  2016.

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