Refineries denounce diesel import decision

Contend local stocks are available, only products in deficit should be imported

ISLAMABAD:

Refineries have hit back at the Oil and Gas Regulatory Authority (Ogra) for allowing import of diesel by an oil marketing company (OMC) in what the industry says in “suspicious circumstances”.

They point out that the refineries are already facing acute storage constraints owing to thin purchases of petroleum products, caused by smuggling and an economic downturn. In this situation, they are forced to run plants at lower capacity and at times shut them down.

“Now, on top of that, allowing the import of HSD (high-speed diesel) under suspicious circumstances is no less than stabbing refineries in the back,” they said in a letter sent to the Ogra chairman.

The refineries, in the letter dated May 23, 2024, voiced concern over the challenges in product offtake, sparked by the failure of OMCs to procure the committed volumes of HSD and motor gasoline (Mogas or petrol), especially in the past two months.

In this context, they requested the regulator to direct OMCs to lift the committed quantities of petroleum products, essential for smooth refinery operations, and only import in case of a deficit.

It was pointed out that all refineries had opposed the request of an OMC for import of 15,000 tons of HSD during June 2024 as excess diesel stocks were available in the country. As a result, the request was turned down, as was evident from the HSD import plan finalised and shared through product review minutes by Ogra on June 11, 2024.

“Contrary to the above, it has come to our notice that Ogra has allowed import of 15,000 tons of HSD via an email dated June 12, 2024 in response to the OMC’s request, on the pretext of stock building/sales during June 2024,” the refineries said and called it “most disappointing”.

The refineries, already grappling with the free flow of smuggled products and huge HSD inventories, had once again been punished with unabated imports, the letter quoted them as saying.

“It is essential to ensure the upliftment of local refineries’ products before allowing any Mogas/HSD imports, as clearly envisaged under Rule 35(g) of the Pakistan Oil (Refining, Blending, Transportation, Storage and Marketing) Rules 2016.”

Considering the volatile market conditions and available stocks of Mogas and HSD, the refineries requested Ogra to revisit its HSD import decision and direct OMCs to first ensure the purchase of required petroleum products from local refineries before seeking import permission.

They also urged Ogra to ensure that all OMCs maintain the mandatory 20-day stock cover, as per the regulator’s licence conditions, through lifting local stocks.

“This is crucial for the sustainable operation of refineries and that Mogas and HSD imports should only be allowed to the extent of actual deficit quantities,” the letter said.