Attock Refinery may continue to produce low-grade petrol

Govt likely to relax the policy, other refineries will churn out higher-quality fuel

ISLAMABAD: The government is set to relax the policy, introduced to encourage production of higher-grade petrol, for Attock Refinery that may continue to churn out low-quality fuel.

At present, 87 RON (Research Octane Number) petrol, which is of relatively poor quality and damages car engines, is being produced and consumed in the country, though local refineries have got incentives to produce fuel of higher grade. Now, the government has planned to import 92 RON petrol.



Keeping in line with international practices, Pakistan would also have to start producing 92 RON petrol that is marketed around the world.

“Refineries will begin producing 90 RON petrol except for Attock Refinery that may continue to churn out 87 RON until a solution is found to reduce and eliminate its surplus naphtha production,” the Ministry of Petroleum and Natural Resources told the Economic Coordination Committee (ECC) while elaborating its plan for introducing higher-quality petrol.

As part of the proposed plan, oil marketing companies (OMCs) will be allowed to import and market a minimum 92 RON premier motor gasoline (petrol) under the existing regulatory environment. The import of petrol below that grade will not be permitted.

From local refineries, the OMCs will receive 87/90 RON petrol according to the existing mechanism.

There will be no bar on the mixing of imported and locally produced fuel grades as it will improve the product specification to around 92 RON. However, the refineries will not be bound to blend the local and imported products.



If any refinery decides to produce 92 RON petrol after blending lower-grade fuel with 95/97 RON, it has been proposed that it should be allowed according to the requirement finalised in the monthly product review meeting.

A change may be made in the import policy order through a notification of the Ministry of Commerce that will allow the refineries import of higher-octane petrol.

The price for the imported 92 RON petrol will be based on the five-day average as per international practice plus tender premium, freight and incidental charges.

The price will be based on Pakistan State Oil (PSO)’s landed import price. Other OMCs and refineries will also price petrol on the basis of PSO’s landed import price. The pricing and import of 97 RON premier motor gasoline (high octane blending component) will be fully deregulated.

Local refineries that produce 92 RON either directly or through blending may get the full price based on PSO’s landed import price. Taxes, levies and other costs applicable to the existing 87 RON petrol will also apply to 92 RON and 95 RON while 97 RON is already subject to taxes and levies.

The Oil and Gas Regulatory Authority will monitor the sale price of 92/95 RON petrol as being currently done for 87 RON.

The annual consumption of premier motor gasoline is about 5 million tons in Pakistan. About 70% of the requirement (3.5 million tons) is catered to through imports while 30% (1.5 million tons) is met through local refinery production.



Last five years have recorded an average growth of around 20% in the consumption of premier motor gaoline. The price differential between 87 RON and 92 RON is around Rs2.74 per litre based on the monthly average data for the period July 2015 and May 2016.

Published in The Express Tribune, July 31^st, 2016.

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