OGRA swings into action to protect refineries

Cancels some HSD cargos of oil marketing companies for months of Oct and Nov

ISLAMABAD:

The fuel regulator has temporarily halted some oil marketing companies (OMCs) from importing High-Speed Diesel (HSD) to address concerns raised by oil refineries about an excessive stock of the fuel, which they warn "may lead to the collapse of the country's supply chain."

In an emergency meeting on Wednesday, the Oil and Gas Regulatory Authority (OGRA) canceled two diesel cargoes for Pakistan State Oil (PSO) and one for the GO company. PSO was instructed to cancel its cargoes for October and November, while GO was directed to cancel its October cargo.

According to a statement issued by the OGRA spokesperson, representatives from refineries and oil marketing companies participated in the meeting held in Islamabad. The meeting reviewed strategies to address issues related to refineries and the country's HSD reserves.

OGRA later decided to postpone the September cargoes of major importing oil marketing companies. Three cargoes scheduled for October will either be rescheduled or canceled.

Cargoes for December may also be canceled if necessary. The cargo that has already arrived will be placed in bonded storage to ensure it is not available for sale until the end of September.

The decision was taken in response to concerns raised by four oil refineries in a letter addressed to the secretary of the Ministry of Energy (Petroleum Division).

The refineries highlighted that the country's HSD stocks were critically high—770,000 metric tonnes as of August 30, 2024—providing a 50-day cover at current demand. They warned that any further import of HSD in the coming months might lead to the collapse of the country's supply chain.

In individual and joint correspondence with OGRA over the past two years, the refineries have consistently highlighted that they are struggling to operate due to the non-upliftment of HSD production/stocks by marketing companies.

"OGRA has been regularly allowing imports of HSD, which not only increases the burden on forex reserves and could eventually lead to the shutdown of refinery operations, but also violates Rule 35(g) of OGRA Rules," which outlines the criteria for granting licenses to new oil marketing companies," the letter stated.

The slowdown or shutdown of refineries due to the non-upliftment of their products also jeopardizes their cases for upgrading projects, as higher production of HSD and Mogas post-upgrade without adequate upliftment does not justify the required heavy investments.

"If this situation is left unattended, it could lead to the collapse of the entire supply chain of the country and also jeopardize the planned investment in the refining sector," the letter added.