ISLAMABAD: The refineries have raised a red flag on diesel glut in the country that has surged to a new high mainly because of perpetual import by a private oil marketing company (OMC) and a new spike in smuggling of product from Iran.
With the IMF programme being stalled due to the gap in external financing, the government needs to be prudent about how it spends its scarce forex reserves.
The top managements of all refineries held a virtual meeting on Thursday with the Oil and Gas Regulatory Authority (Ogra).
According to the official sources, the refineries grilled Ogra till the end of the meeting that lasted for two and a half hours. “They held Ogra responsible for ‘all diesel glut mess’ arguing the regulator kept on extending unjustified permission to an OMC to keep importing diesel knowing the fact that refineries were brimming with the product,” insiders said while quoting the top men of refineries as saying.
The refineries also came down hard on Ogra for not playing an effective role to curb the smuggling of Iranian diesel that has spiked to 7,000-8,000 tons a day.
The Ogra chairman assured the refineries that it would convene a special PRM (product review meeting) to revisit the decision under which the OMC in question had been allowed to import diesel.
According to the refineries, sources said, the Ogra first allowed the OMC to import 15,000 tons of diesel, then 34,000 tonnes and 50,000 tonnes on September 3, despite the fact that PSO was importing two vessels of diesel, each carrying 50,000 tons, for September and a stock of 50 days was already available.
“An average 50,000MT HSD import costs around $38 million. With current September imports planned for 183,000MT, this would mean an outflow of $140 million. Approximate monthly HSD demand in the country is around 500,000MT out of which 425,000MT is being catered for by the local refineries.”
Right now the country is flooded with diesel of 770,000 tons whereas the average daily consumption stands at 15,600 tons. The refineries produce 14,000 tons daily out of 11,000 tons is sold and the remaining quantity is added to the stock, which has now increased to 77,000 tons that is enough for 40-50 days. Out of the total sale of 15,600 tons per day, the smuggled diesel’s share is sizeable. The demand for diesel is at the lowest ebb as people prefer to buy Iranian diesel at cheaper rates.
The other factor is that flood has hit the country. During the meeting, DG Oil asked the refineries to scale down their throughput.
A representative of the OMC in question, according to the officials, responded to refineries arguing that it imported diesel with the permission of Ogra because the refineries did not provide the product to it and also said that there was a demand for the product in the local market. The refineries responded that the OMC should follow the other OMCs and purchase local diesel, stressing that they could not provide the product to it on 90 days credit. “The other OMCs pay to the refineries in advance and get diesel.”
The OMC representative said there was a time when its market share stood at 9-10 percent but in the wake of liquidity crisis, it lost its share. “Now it is in the process of regaining its share, as its liquidity has improved after investment by Saudi Aramco,” the official said while quoting the OMC’s representative.