PSO asked to reassess oil purchase contract

OGRA makes request keeping in view high diesel stocks

ISLAMABAD:

The oil and gas industry regulator has asked the Petroleum Division to ensure that Pakistan State Oil (PSO) reassess the fuel quantity contracted with Kuwait Petroleum Corporation (KPC) while keeping in view the high stocks of diesel in the country.

The high inventory of diesel in the wake of imports has sparked concerns among local oil refineries. Ogra has voiced hope that the situation will improve if PSO revises the contract with KPC.

In a letter sent to the DG Oil Petroleum Division, Ogra said that actual stocks of HSD stood at around 664,813 metric tons as of August 30, 2024, which were sufficient to meet 44 days of national demand.

Secondly, according to Ogra, sales, import and production estimates and plans are finalised during product review meetings with a careful consideration of multiple variables. "These measures are designed to build resilience in the national oil supply chain."

However, estimates can vary, necessitating continuous monitoring and adjustments to plans when there are material changes in the underlying assumptions. In light of the current situation, Ogra said it had taken the following corrective actions aimed at easing the pressure on refineries.

Gas and Oil Pakistan (GO), which was earlier advised to re-route its cargo or hold it at the outer anchorage until the last week of September, is now being advised to keep its product in bonded storage until the third week of September.

This measure is aimed at easing the pressure on refineries and avoiding demurrage costs.

Also, PSO has deferred its one cargo of 55,000 metric tons for September and is considering reviewing its December plans. Imports for October will be reviewed and rationalised in a meeting slated for Wednesday (September 4, 2024).

At present, according to Ogra, PSO is holding an inventory of approximately 336,000 metric tons of diesel, constituting 50% of total stocks.

"Rule 35(g) is applied across the board, regardless of the size of a company or group. However, PSO is bound by its government-to-government agreement with KPC to purchase a minimum of 1.8 million tons of HSD per annum," it said.

"Given the current demand scenario and the ingress of smuggled products, PSO must reassess the contractual quantities locked in with KPC. We hope that the situation will start getting better in view of the aforesaid actions."