Pakistan's National Refinery shuts down as oil demand drops due to pandemic

PTI govt directs OMCs, refineries to cancel import orders for petrol and crude oil

Zafar Bhutta March 27, 2020

ISLAMABAD: The slump in oil demand in the wake of coronavirus pandemic has now led to the closure of National Refinery Limited (NRL) and the government has directed oil marketing companies (OMCs) and oil refineries to cancel orders for import of petrol and crude oil respectively.

Earlier, Attock Refinery Limited, which operates on locally produced crude oil, had warned that closure of the refinery would also affect operations of oil and gas exploration companies. In order to ensure smooth operations of the exploration companies, the director general oil has conveyed his decision to the refineries, instructing them to cancel orders for import of crude oil, but it will lead to the shutdown of other refineries - Byco, PRL and Parco - that operate on imported crude oil.

In addition to shelving import orders for crude oil, the government has also directed OMCs to cancel orders for import of petrol to run local refineries, which has led to the shutdown of NRL.

Sources told The Express Tribune that it was a good decision of the government to shelve orders for import of petrol but cancelling orders for crude oil import would affect the refineries that operate on imported crude oil.

In a letter sent to the Oil Companies Advisory Council (OCAC) chief executive officer on Wednesday, the Petroleum Division director general oil said that in order to ensure smooth operations of exploration and production companies, refineries are directed to cancel their crude imports.

The Petroleum Division further said that consumption of motor gasoline has dropped significantly due to the enforcement of lockdowns by provincial governments to control the spread of COVID-19.

As OMCs have sufficient inventory of the product, therefore, all OMCs are requested to cancel their planned imports (April 2020 onwards) and increase their offtake from refineries so that operations of the refineries are maintained at an adequate level, said the Petroleum Division, adding that all OMCs are advised to finalise and update their commercial agreements with the local refineries for the required product sourcing. “Refineries may facilitate OMCs in this regard.”

“OCAC is requested to convey above directives to all OMCs/refineries for strict compliance,” said the Petroleum Division.

Oil refineries have hailed the decision of the government for its timely intervention in stopping import of motor gasoline.

Pakistan Refinery Limited (PRL) had declared availability of 32,000 tons of petrol for March 2020. Against the allocation of 25,800 tons for the first 25 days of the month, only 16,400 tons have been lifted to date, translating into a shortfall of 9,400 tons.

PRL is carrying stocks of over 11,000 tons and is now left with only two days of ullage of motor spirit with no product purchase order for Thursday.

“The situation is extremely serious and PRL is surviving on an hour-to-hour basis with only 48 hours of ullage left. In order to ensure uninterrupted supply of petroleum products, including JP-8 to Pakistan Air Force, your immediate intervention is solicited, especially in light of the directives of the ministry to OMCs to stop import of motor gasoline,” PRL said in a letter sent to the Petroleum Division. It added, “We request you to please consider the motor gasoline stock of refineries before permitting OMCs to resume their import of the same.”

Meanwhile, NRL announced on Thursday the shutdown of the refinery following a dip in oil demand in the wake of coronavirus-induced lockdown.

In a notice issued to the Pakistan Stock Exchange, the NRL management said in view of the decision of provincial governments for lockdown to curb the spread of coronavirus, resulting in extremely low demand for petroleum products, the company has decided to temporary close down all of its production with effect from March 25, 2020 as it carries sufficient inventories to meet current requirements.

“The decision will also help in reducing exposure of its employees to the pandemic. The situation will be reviewed during the first week of April 2020 for the restart of refinery,” it said.

“Import of crude, petrol and diesel has been cancelled due to the reduction in country’s demand while sufficient products are already in stock,” a Petroleum Division spokesperson told The Express Tribune. “NRL has on its own closed the refinery due to the decision of provincial governments to lock down provinces while other refineries will remain in operation,” the official added. 

Published in The Express Tribune, March 27th, 2020.

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