PSO against extra HSD allocation

Says higher-than-required diesel provision poses supply chain risks

ISLAMABAD:

The state-owned oil marketing company (OMC), Pakistan State Oil (PSO), has voiced concern over the allocation of additional high-speed diesel (HSD), terming it an attempt to favour some refineries and OMCs.

It has pointed out that PSO was allocated the additional volumes, which a few other OMCs refused to procure, though the allocation had been made in the product review meeting (PRM). It was feared that the additional quantity posed a serious risk to its supply chain.

Sources told The Express Tribune that some OMCs had been allocated diesel during the PRM, but it was diverted to PSO. PSO management, according to the sources, has sent a letter to the chairman of Oil and Gas Regulatory Authority (Ogra), wherein it expressed serious concern over the allocation of additional volumes of HSD, which accounted for over 45% of the total allocation.

In the letter, PSO referred to an earlier communication with Ogra on August 28, 2025 and the recent PRMs held on September 11, 12 and 17, 2025.

"We wish to express our serious concern that, despite PSO's repeated cautioning, additional HSD volumes – primarily arising from 'non-upliftment' of PRM (product review meeting) allocations by several OMCs and refinery overproduction against declared numbers – are being disproportionately diverted to PSO in the PRM for October 2025," PSO authorities said, adding that such extraordinary reallocation, reaching nearly 45% above PSO's regular allocation and announced only days before the commencement of the month, has severely disrupted the company's supply chain planning and management.

"We are surprised and fail to understand the rationale and logic behind such sudden and drastic changes in PSO's allocations," a company official remarked.

Notably, in the PRM held on August 19, 2025, refineries allocated 126k tons of HSD to PSO, which was in line with the monthly trend. However, it was later unilaterally revised to 145k tons in draft papers for October floated on September 10, 2025 and then drastically increased during the meeting on September 17, 2025 to 174k tons.

As discussed in detail during the PRM – and supported with data – the major refineries with which PSO has supply arrangements produced around 71k tons of additional HSD compared to their declared numbers during June-September 2025.

Moreover, these refineries have now increased their October production numbers by around 18k tons compared to the numbers declared in the previous meeting on August 19, PSO officials said, adding that the extraordinary difference between the declared and actual production and repeated revisions in production numbers compromised the entire supply chain planning.

PSO management said that the company should not be obligated to procure such unplanned, overproduced volumes, particularly considering that the OMC consistently honours its allocation commitments and maintains stock cover well above the mandatory 20-day requirement.

The stock position as of September 16, 2025 clearly shows that most OMCs – both major and minor – are not keeping the required 20-day cover and have short-lifted 78k tons from June to August 2025.

"This exposes the industry to supply chain risks in the event of sudden demand surges, similar to those witnessed during October-November 2024," PSO authorities said, adding that such non-compliance puts undue pressure on the compliant OMCs, distorts market dynamics and raises financing costs for maintaining the mandatory stock cover in an already competitive environment.

PSO reiterated that they were already carrying high HSD stocks and were not in a position to take additional quantities beyond the usual allocation for October.

It is, therefore, suggested that instead of burdening PSO with unplanned volumes, Ogra should ensure strict enforcement of PRM allocations, PSO officials stressed, adding that all OMCs should be obligated to fully procure their declared refinery allocations to meet the 20-day licensing requirement and refineries should be directed to produce in line with declared numbers to avoid supply chain imbalances.