Oil sector urges revision of IFEM audit terms

KARACHI: The oil sector has requested a revision of the terms of reference (ToRs) for the Inland Freight Equalization Margin (IFEM) audit before it commences. The Oil and Gas Regulatory Authority (Ogra) has finalized the ToRs for IFEM audits covering FY2021 to FY2023, which fully disallow freight reimbursement in cases of non-compliance with the defined white oil pipeline (WOP) input levels.

In a letter from the Oil Companies Advisory Council (OCAC) to Ogra on Tuesday, it was noted that the input of locally produced Mogas into the WOP is not feasible due to differences in product specifications between imported and local products. Despite this, local products are still included when calculating the mandatory volume of Mogas to be transported through the WOP. “This is erroneous and creates an unnecessary burden on several oil marketing companies (OMCs),” the letter stated.

The letter further explained that freight rates for primary movements are based on round trip distance (RTD) and are adjusted according to changes in relevant costs and negotiations with transporters. However, the basis for freight related to Special Area Sales remains unclear, with freight rates being revised as a percentage in line with primary freight revisions. In cases where a new special area route or destination is added, the RTD basis is used for freight computation.

Given that the road network in special areas has improved significantly, the OCAC recommended a review of RTDs for all special area routes, preferably conducted by an independent consultant. This review would align special area freight with current road infrastructure and ensure that accurate freight charges are applied to consumers through the IFEM.