PSO wins govt approval to import HSD on behalf of all OMCs

KARACHI: Pakistan State Oil (PSO), the country's largest oil marketing company, has received approval from the government to exclusively import high-speed diesel (HSD) to meet the domestic demand, an official document showed.

The Petroleum Division of the Ministry of Energy has agreed to PSO's proposal, made in September last year, to import HSD on behalf of all oil marketing companies (OMCs) in the country.

The Oil and Gas Regulatory Authority (OGRA) has been asked to consult with the oil industry and finalize a framework for the arrangement, which is expected to benefit the country from both economic and operational perspectives, the document added.

“The Division has thoroughly examined the proposal and principally agrees with the proposal to the extent of exclusive import of HSD through PSO to meet the country’s HSD demand,” said the document.

"The Petroleum Division asked the Oil & Gas Regulatory Authority (OGRA) to develop a broader consensus for finalization of a mutually agreed framework in consultation with the oil industry to meet the country’s entire HSD demand so as to ensure participation of all OMCs, if possible, as it would be beneficial for the country from both economic and operational perspectives."

Oil industry officials said the PSO imports HSD from Kuwait Petroleum Corporation (KPC) under a government-to-government arrangement and has the advantage on premium and settlement of LC for its import.

"For instance, if the PSO is paying a premium of $4 per barrel, the other OMCs would be paying more than it. However, the local pricing is set on the premium of PSO," an industry official said.

Although ninety percent of HSD is still being imported by PSO and the remaining ten percent by other OMCs, the import of the entire HSD by PSO would help not only in meeting the demand, but also settle the concerns and reservations of OMCs, which complain about the domestic price of HSD based on PSO import and adjustment of PSO’s premium and exchange rate."

Premium is the amount that is paid over or below the market price of a petroleum product, depending on the demand. If the demand of a particular product is higher than the market rate, the price is paid over the market rate and if the demand is low, then suppliers often sell it below the actual rate to dispose of the stock. Pakistan imports HSD to meet its domestic demand as local refineries don’t produce enough to cater to the domestic need fully.