OCAC slams Ogra’s decision to increase HSD imports

KARACHI: The Oil Companies Advisory Council (OCAC) on Saturday called the Oil & Gas Regulatory Authority (Ogra) for its repeated decisions to approve additional imports of high-speed diesel (HSD) despite already high stock levels ‘irresponsible’.

Ogra justified these decisions by citing the imminent turnaround of Pakistan’s largest refinery and the agricultural season, but the OCAC deemed these reasons baseless.

According to the OCAC, if Ogra’s claims were valid, refineries should be operating at full capacity without needing extra storage. The council stated that refinery maintenance turnarounds are carefully planned, with stock levels calculated to cover the shutdown period.

This planning has been coordinated with Ogra through several meetings, and no solid reasons were found for approving more HSD imports, especially given the country’s existing surplus of over 45 days’ worth of HSD. Additionally, since April 2024, refineries have been renting extra storage for HSD, which is adding to their financial strain.

A review of the facts clarifies the situation. Average monthly HSD sales, including seasonal demand, were 520,000 tonnes in FY 2023-24. Ogra’s claim that decreased sales are solely due to price trends is unfounded. Sales have been consistently dropping since 2023 due to reduced economic activity and ongoing cross-border smuggling, with no significant increase in demand outside the agricultural season.

During the April-June 2024 agricultural season, monthly average sales were 551,000 tons, and the country’s needs could be met with the 400,000 tonnes of HSD supplied monthly by refineries without requiring additional imports from PSO.

The influx of HSD from cross-border sources has already disrupted local demand. Without addressing this influx, the justification for further imports is weak and harmful to local refineries. These issues have been repeatedly raised in product review meetings and documented by Ogra in the minutes of meeting from April to July 2024, highlighting the high stock levels, low sales, and the need to support local refineries facing storage constraints by rationalizing imports.

In June, July and August, additional HSD import approvals were granted for 15,000 tonnes each month, and the product has been discharged. Another 38,000 tonnes were approved for September 2024. This cargo arrived on August 30, 2024, and is awaiting discharge. The September import schedule was known to the regulator during the PRM. Claims about the timing of this cargo during the agricultural season lack justification in the absence of specific minutes of meeting.

Ogra’s repeated advice for refineries to compete under commercial terms with the international market essentially means succumbing to unfair conditions imposed by specific OMCs. PSO, which imports HSD under a long-term G-to-G contract, cancels cargoes to assist refineries amid rampant smuggling and low sales, and other OMC imports should be similarly discouraged. This situation demonstrates that linking unjustified additional imports to refinery shutdowns is unreasonable. Ogra’s flexibility in allowing additional imports is meant for motor gasoline, not HSD.

While Ogra is responsible for granting import approvals, these decisions should prioritize the integrity of the national oil supply chain. Excessive imports are leading to unfair market practices, such as substantial discounting without benefiting consumers, according to the oil body.