Pakistan Refinery warns of plant closure

Pakistan Refinery Limited says OMCs are importing, not lifting locally produced oil products

ISLAMABAD: Pakistan Refinery Limited (PRL) has warned the government of possible closure following refusal of oil marketing companies (OMCs) - which are giving preference to imports - to lift the locally produced petroleum products.

PRL management warned that the refinery was surviving on an hour-to-hour basis and it may not only lead to the closure of refinery but it was also going to face a major hit due to inventory losses in the wake of OMCs’ reluctance to lift high-speed diesel and petrol.

Sources told The Express Tribune that Pakistan State Oil (PSO), being a major oil importer, had continued to import high-speed diesel and petrol and refused to lift locally produced petroleum products from the refineries, especially PRL. Other OMCs were also hesitant to lift petroleum products from the refineries.

Officials said PSO and some other OMCs imported 320,978 tons of high-speed diesel and 576,113 tons of petrol in February 2020. PRL had declared the availability of 40,000 tons of high-speed diesel in the last month and only 28,600 tons were lifted, causing inventory losses to the refinery.

PRL, in a letter sent to the petroleum secretary, said the Oil Companies Advisory Committee (OCAC) held a meeting on March 3, 2020 to discuss the demand and supply situation of petroleum products.

“We would like to bring to your notice the short-lifting of high-speed diesel and petrol which, owing to ullage constraints, can lead to the possible closure of the refinery. In this regard, we request your urgent intervention,” said the PRL management.

Purchasing high-speed diesel

Referring to the demand for high-speed diesel, PRL said 55,000 tons of high-speed diesel had been available in March 2020 and around 18,000 tons had been allocated for the first 10 days of March.

Around 13,000 tons were lifted by the OMCs. At present, “we are carrying around 15,000 tons of high-speed diesel stocks and are now left with only two days of diesel ullage,” said the PRL management.

It added that unfortunately a similar situation had emerged last month wherein the refinery had declared availability of 40,000 tons of high-speed diesel and only 28,600 tons were lifted.

“It is imperative that OMCs furnish high-speed diesel intents to ease this precarious situation,” the company added.

Petrol demand

The company management also said it had declared availability of 32,000 tons of petrol for March 2020. Against the allocation of 10,300 tons for the first 10 days, only 5,000 tons were lifted to date, falling short by 5,300 tons.

“We are carrying stocks of around 5,000 tons and are now left with only two days of petrol ullage.”

The PRL management also stated that the Ministry of Energy (Petroleum Division) had on numerous occasions intervened to bail the refineries out of such a crisis.

“Needless to say, the situation is extremely serious and Pakistan Refinery Limited is surviving on an hour-to-hour basis with only 48 hours of ullage left,” the letter added.

Responding to the situation, a PSO spokesperson said, “PSO is the largest buyer from the refineries in Pakistan. The company has increased local purchases from approximately 30% a few years ago to 42% in the current year. PSO imports have been reduced accordingly.

“It is also important to note that the company’s local purchases of petroleum products are always in accordance with the allocation made in the monthly product review meeting of the Ministry of Energy (Petroleum Division).”

Published in The Express Tribune, March 12^th, 2020.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.