Looming oil crisis perturbs senators

Committee advises govt to take timely measures to avert diesel scarcity

Our Correspondent March 18, 2022


The Senate Standing Committee on Petroleum has expressed apprehension about the looming diesel crisis in the country, advising the government to take timely measures in order to prevent any such calamity.

In a meeting held on Thursday to review petroleum imports, supplies and pricing strategies in the wake of Russia-Ukraine conflict, the committee was informed that around 26 days of diesel stocks were available at present, while the stocks for next month were also secured.

Committee chairman lamented that Pak-Arab Refinery (Parco) and Attock Refinery “do not supply diesel and all the responsibility is on Pakistan State Oil (PSO) for its supply”.

He recommended sharing the burden of PSO in diesel supply and taking practical steps to stave off the shortage of high-speed diesel (HSD) “as the harvesting season is approaching fast”.

Meeting participants were of the view that oil marketing companies (OMCs) should be taken into confidence regarding prompt payment of price differential claims in order to avert any shortage in the market.

“The expected price differential claim (for March 1-15) is Rs883 million, however in subsequent fortnights, it is expected to be around Rs30 billion depending on international oil prices,” it was informed.

The committee observed that the government was giving around Rs20-22 billion in the shape of annual cross-subsidy.

The annual gas consumption by fertiliser plants stood at 19%, while the Power Division consumed 21%, it was learnt.

The committee received a comprehensive briefing from the Ministry of Energy (Petroleum Division) on the government’s strategy and plans to handle oil imports and cope with rising prices in the backdrop of Russia-Ukraine conflict.

Read: Cheaper petrol for the poor

It was informed that a price differential of Rs2.28 per litre of HSD would be paid to the OMCs/ refineries.

The committee was apprised that the mitigation efforts also included the ECC-approved budget of Rs20 billion with a quick mechanism to pay PDC to the OMCs/ refineries through the Oil and Gas Regulatory Authority (Ogra) and PSO within seven days after every fortnight.

A total of five cargoes through the long-term government-to-government supplier – Kuwait Petroleum Corporation – were expected in March and the remaining in April, it was learnt.

The government’s plans to reduce and pay off circular debt in the gas sector were also discussed in detail.

“Companies are a victim of the government’s policy to subsidise gas,” the meeting participants lamented.

New laws have been enacted, empowering Ogra to notify the already determined sale price “if the government does not give timely advice on prices within a period of 40 days”, it was learnt. The new law has enabled Ogra to revise gas prices.

The committee was informed that sale prices were not proportionally revised, resulting in an increase in price differential.

“Sui companies have been directed not to issue any further household connections to tackle rising gas development surcharge (GDS) and shortage of gas in the country.”

The committee was informed that the gas chain differential margin was growing at a much faster pace than the power chain’s circular debt.

Gas differential margin and re-gasified liquefied natural gas (RLNG) diversion grew four times in three years.

The ministry suggested that price revision was essential to contain further accumulation and said that the circular debt was the outcome of policy choices of the government through sub-optimal cross-subsidisation.

Published in The Express Tribune, March 18th, 2022.

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