Govt scrambles for oil backup plans

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ISLAMABAD:

Amid escalating tensions between Iran and Israel, the Oil and Gas Regulatory Authority (Ogra) has warned oil marketing companies (OMCs) to maintain a minimum of 20 days of oil stock in accordance with licensing requirements.

The prime minister has already constituted a high-level committee to explore alternative options in the wake of the Iran-Israel conflict to pre-empt any potential oil shortages in the country.

Oil Marketing Companies are obligated to maintain 20-day oil reserves under their licensing terms. Ogra has previously issued directives to this effect and has now reiterated its warning, stating that companies failing to comply will face penalties and fines.

In a statement, the Ogra spokesperson said, "The Oil and Gas Regulatory Authority (OGRA) has confirmed that the country currently holds sufficient stocks of petroleum products to meet existing demand".

However, in light of future needs and the volatile market environment, Ogra has formally advised all OMCs to adhere strictly to the mandatory 20-day stock levels, as stipulated in their respective licences.

"OGRA remains committed to monitoring the situation closely and will continue to take proactive steps to ensure national energy security," the spokesperson added.

In response to the evolving geopolitical situation following Israel's recent attack on Iran and the resulting fluctuations in global oil markets, Prime Minister Shehbaz Sharif constituted a high-level committee to oversee petroleum pricing and supply dynamics.

The committee is headed by the finance minister and includes senior representatives from key federal ministries, regulatory bodies and energy sector experts. It has already held its first meeting and is scheduled to reconvene early next week to assess possible supply routes and contingency measures.

During its initial meeting, the committee explored alternative oil supply routes from Saudi Arabia and the United Arab Emirates (UAE), including pipeline transport, in case the Strait of Hormuz – a critical global oil supply route – is blocked due to escalating hostilities.

The committee was informed that Saudi Arabia possesses an existing pipeline network, including the East-West Pipeline (Petroline), which transports crude from its eastern province to the Red Sea port of Yanbu.

Similarly, the UAE's Abu Dhabi Crude Oil Pipeline (Adcop) to Fujairah is designed to bypass the Strait of Hormuz, ensuring uninterrupted exports.

The Petroleum Division, in a submitted report, stated that the Strait of Hormuz handles 20% of global crude oil exports.

Any closure of this route by Iran could severely impact global supply chains, including Pakistan's. Under a worst-case scenario, global oil prices could surge to $100–$150 per barrel.

While there is currently no immediate threat of a spike in prices, Pakistan is in discussions with international oil suppliers to ensure continuity of supply.

At present, the country has access to up to one million tons of furnace oil storage capacity through abandoned power plants.

Experts have recommended that the government utilise these facilities to store strategic oil reserves. It has also been proposed that the government purchase these storages, as the power sector plans to dispose of them as scrap.