Oil industry criticizes Ogra for persistent high-speed diesel imports

KARACHI: The oil sector voiced strong objections on Thursday against the Oil & Gas Regulatory Authority (Ogra) over its continued approval of high-speed diesel (HSD) imports. The sector expressed serious concerns over Ogra’s ability to effectively regulate the industry.

In a letter to Ogra, the Oil Companies Advisory Council (OCAC), which represents the oil industry, highlighted its frustration with the regulator’s persistent approval of HSD imports by a specific oil marketing company (OMC).

The OCAC accused the company of repeatedly flouting the Pakistan Oil (Refining, Blending, Transportation, Storage, and Marketing) Rules 2016 (Ogra Rules) and engaging in unfair practices that adversely affect the entire sector.

The oil sector has raised alarms about Ogra’s ongoing import approvals despite widespread opposition from refineries, which are currently burdened with excessive HSD stocks. This situation, according to the OCAC, calls into question Ogra’s effectiveness in transparently regulating the oil sector and contrasts sharply with market dynamics.

OCAC members have consistently complained to Ogra about the need to manage local product disposal to ensure smooth refinery operations, requesting that only actual deficit volumes be imported as per Ogra Rules. They claim that the regulatory body has not provided the necessary support.

The council noted that while Ogra could permit imports if refineries were unable to meet OMC needs, it is unjustified to grant import permissions under the pretext of foreign investment or unreasonable commercial terms imposed on local refineries.

As of Thursday, the country holds over 600,000 tonnes of HSD, with two additional cargoes totalling around 90,000 tonnes expected in the coming days. Given the current low sales of approximately 16,000 tonnes per day, the future sustainability of refinery operations looks bleak, the OCAC warned.

The sector is further alarmed by the continued smuggling of petroleum products and recent imports of light aliphatic hydrocarbon solvent oil via the Taftan Terminal, a hazardous product reportedly used as an adulterant in petrol. Reports suggest this solvent oil is being offloaded directly at petrol stations across various regions.

A fact-finding committee later allowed the release of 874 detained tankers with a penalty of Rs300,000 per tanker, stipulating that the product be supplied under the oversight of customs intelligence and district authorities -- a decision the OCAC finds questionable.

The OCAC highlighted that refineries, already struggling with the influx of smuggled products, are now facing contamination of adulterated products as far as Rawalpindi/Islamabad and Peshawar. They cited instances where smuggled and inferior quality products were found, posing serious risks.

The council recommended that no imports ofnon-KPC HSD be allowed and urged that any OMC seeking HSD imports must coordinate with local refineries to meet demand.Separately, Ogra has instructed oil marketing companies (OMCs) to promptly begin the uplift of high-speed diesel (HSD) from refineries.

Ogra warned in a letter to OMCs that failure to comply with this directive could result in severe consequences for non-compliant companies. The agency emphasized this move is crucial to prevent potential disruptions in supply.

Ogra highlighted the importance of refineries operating efficiently and the timely removal of petroleum products to ensure the smooth functioning of the National Oil Supply Chain (NOSC). According to Ogra, refineries are essential for maintaining a consistent production of petroleum products to meet national demand, making their optimal performance critical for the stability of the NOSC.

The coordination between refineries and OMCs is essential to prevent supply interruptions.However, Ogra noted that the uplift of HSD in the first half of August was lower than the allocated volumes. The authority stressed that timely and efficient lifting of petroleum products by OMCs is vital, as delays place additional strain on refineries, reducing their production capacity and potentially leading to supply disruptions.