PSO warns diesel stocks crisis looming

Tells petroleum division stocks at OMCs across the country plummet to an average of 2-3 days requirement

ISLAMABAD: The stock of diesel with the oil marketing companies (OMCs) except the Pakistan State Oil (PSO) have plummeted to an average of three days across that country due to low uplifting from the refineries, hoarding and exploitation of import by some oil firms.

The state-run PSO, in a letter to the petroleum division, a copy of which is available with The Express Tribune, has warned of a crisis of diesel stocks, saying that the OMCs, except the PSO, have the cover of not more than 2-3 days.

The PSO informed that the petroleum division of the energy ministry not only allowed the imports of high speed diesel (HSD) to a few OMCs in last week of April but also berthed their vessels in a prompt manner to keep adequate stocks in White Oil Pipeline (WOP) and upcountry.

However, these OMCs did not make these cargoes available at upcountry rather offloaded at their Port Qasim terminals despite critical stocks in WOP, seemingly to exploit the expected PDL increase effective May 1, 2020 and earn hefty profits, accordingly.

“It is regretfully informed that despite PSO’s timely intimation that few major OMCs are not uplifting products from local refineries and not maintaining adequate days cover of products (particularly HSD) despite high sales trend, the stock levels of these OMCs kept declining throughout the month of April 2020 without any action taken against them and resultantly, the industry is on verge of HSD dry-out in peak harvesting season and considerably high sales trend due to massive price decrease effective 1 st May 2020,” the PSO said.

It is also on record that despite severe financial issues due to the circular debt and non-release of funds by the government, the PSO kept uplifting products from local refineries to maintain adequate stocks level and playing its part to keep the refineries running.

However, due to very low uplifting from other OMCs, particularly of the Motor Gasoline, Parco and the NRL, went into shutdown, while the other refineries kept running on a very low throughput in the month of April, resulting in limited HSD availability from the refineries.

The OMC maintains a stock of diesel for 17 days, Shell for 6 days, Total seven days, the APL seven days the HPL 29 days, GO four days, Byco nine days and BE 12 days cover.

The PSO planned to maintain an even higher days cover as of May 1, 2020, which “we were not able to do because of cancellation of two HSD cargoes of April 2020 on ministry’s directives,” the letter said.

“As the days cover based on April 2020 average daily sales, it is also worth-noting that almost all the major OMCs, except PSO, have days cover of not more than 2-3 days, considering the high expected sales trend in first week of May 2020, which was known to everyone considering massive price decrease and the harvesting season.

“It may be noted that HPL’s 29-day cover being showed is of no purpose as almost all of this product is at Port Qasim and they are effectively dry in WOP and upcountry locations. Due to these critically low stocks of almost all major OMCs, excluding PSO, they did not operate their depots effectively and curtailed the supplies on May 1, 2020 despite ministry’s clear directives vide letter dated April 29, 2020 to operate depots and maintain uninterrupted supplies to the retail outlets.”

It has been reported that major OMCs hoarded the product at main supply hubs ie Mehmoodkot, Faisalabad and Machike. On the contrary, PSO operated its depots for more than 20 hours on May 1 despite being the holy month of Ramazan, Labour Day and the Covid-19 risk.

Resultantly, a sudden and huge supply load has been transferred to the PSO and its HSD sales on May 1, 2020 was around 34,000 MT which is “not in line with our usual average of approximately 10,000 MT per day, it said.

“Even today till issuance of this letter, PSO has sold 16,000 MT. Given the massive sales on May 1, 2020, limited product availability from local refineries, reluctance from HPL and GO to give product loan to PSO at MehmoodKot despite commitment at product review meeting forum, PSO will not be able to sustain this huge supply load due to hoarding of product/low stocks of other major OMCs and resultantly, PSO will also get dried out very soon,” it added.

Keeping in view the sensitivity of the matter, PSO sought petroleum division’s action to try avoiding a national crisis which it said was already around the corner. The PSO called for strict punitive action against OMCs having low stocks level and hoarding the product with direction to maintain uninterrupted supplies to their retail outlets.

It urged the ministry to advise HPL and GO to immediately make their imported product available at Mehmoodkot and give a loan of at least 10 KT each to the PSO immediately as per their commitment with MOEPD at PRM.

“Ensure adequate refinery ‘upliftment’ of products by all major OMCs according to their market share particularly MOGAS so that refineries keep producing HSD volumes to a maximum capacity; Advise ministry of finance to immediately release funds to PSO as approved by the GOP [government of Pakistan] enabling us to fulfil our payment obligations against imports as well as local upliftment and open LCs for upcoming cargoes and local upliftment [and] do not allow MOGAS vessels berthing to those OMCs which are not uplifting product from refineries as per their market share and stocks position to take financial gains,” the PSO urged.