Three-pronged strategy devised for seamless oil supply

Amid mounting tensions between the US and Iran, Pakistan's government has developed a three-pronged strategy, which includes boosting refinery production, increasing oil imports and launching a crackdown on oil marketing companies (OMCs) over stock manipulation.

OMCs have reportedly been involved in manipulation of around 300,000 metric tons of stored oil. The Oil and Gas Regulatory Authority (Ogra) has issued show-cause notices to Fazaia Oil, Inam, Askar, Shell, Attock, Hascol, Flow and Puma (47,000 metric tons of field stock) for alleged breach of over 21-day mandatory stock rule.

Investigation is also underway into the manipulation of nearly 300,000 MT of stock with offtake/adjustments across six depots – PSO Machike, GO Keamari, Attock Shikarpur, PSO Mehmood Kot, Rawalpindi and others – within a single week. Ogra-led enforcement teams have been deployed in various regions to inspect and direct the district administration to actively monitor field and retail activities.

At present, several key factors are influencing market dynamics. A price hike is anticipated driven by the US-Iran conflict alongside limited illicit product inflows from western borders. Oil supply has also been impacted by three vessels carrying 161,000 tons that missed their arrival schedules, leading to a drawdown in the existing inventories.

Furthermore, there was limited product availability via pipelines from bonded terminals, specifically Mehmood Kot, Faisalabad and Machike. Together, these factors have caused an imbalance in the oil supply chain, pushing sales for top OMCs up in the range of 14% to 68% compared to the planned July sales.

Sources told The Express Tribune that the government had drawn up a plan to boost oil supply across the country. As part of it, Ogra has initiated an anti-hoarding drive in collaboration with the local administration based on data insights from the authority's dashboard.

Sources revealed that vessels carrying 204,000 tons were en route to Pakistan and would reach in the next 10 days. Ships loaded with 42,000 tons have already been berthed. The government has advised refineries to ramp up production of petrol in July and August. Moreover, all pipeline-linked bonded stocks of OMCs will be cleared at the earliest by Papco, Parco and the Customs.

The regulator has also allowed state-run oil marketing company Pakistan State Oil (PSO) to import additional cargoes at the end of July to replenish its motor spirit (MS) stocks. OMCs have been directed to closely monitor and scrutinise any unusual or abnormally high sales of MS and high-speed diesel (HSD) at their retail outlets. Refineries have also been directed to increase the production of HSD over the next 15 days to cover the production loss of 35,000 tons. Additionally, PSO has got permission to import two HSD cargoes from Kuwait Petroleum during August to cater to national demand and replenish stocks. However, shipping through the Strait of Hormuz will be a challenge due to the geopolitical situation.

Directives have been issued to refineries to buy more crude cargoes during July and August to increase the production of diesel and petrol because of the widening spread and depleting national inventory.

MS and HSD sales have risen significantly in July compared to projections. Planned MS sales were calculated at 295,000 tons but actual demand reached 356,000 tons, resulting in a difference of 61,000 tons, or 21%. Per-day MS sales were estimated at 21,000 tons but actual average hit 25,400 tons.

For HSD, sales were expected to touch 229,000 tons, however, actual sales reached 329,000 tons, a variance of 100,000 tons, or 44%. Per-day HSD sales were estimated at 16,000 tons but averaged 23,500 tons.

The current reported stocks of MS stand at 416,000 tons, which cover 17 days of demand at a consumption rate of 25,000 tons per day. Meanwhile, HSD stocks are at 463,000 tons that could meet 20 days of consumption at a pace of 24,000 tons per day.

Under Ogra's enforcement drive against fuel hoarding, action against suspected outlets and OMCs are being taken, backed by legal authority under the Oil Rules 2016. The regulator has so far inspected 1,922 stations while eight OMCs have been issued show-cause notices.