High-speed diesel imports continue despite abundant local supply

KARACHI: The country imported 245,000 metric tonnes (MT) of high-speed diesel (HSD) during the first two months of the current financial year, despite having substantial stocks available domestically.

According to figures compiled by the oil sector, the country imported nearly 98,000 MT in July and 147,000 MT in August of this financial year.HSD was imported at a time when stocks had risen to an all-time high due to a significant drop in consumption, largely attributed to the smuggling of Iranian diesel and a slowdown in economic activities.

Sources within the oil sector revealed that diesel is readily available, as one refinery has started offering its supply under a forward pricing mechanism. In anticipation of a likely drop in petroleum product prices during the next review, this local refinery has proposed supplying HSD to oil marketing companies (OMCs) at advance prices, effective October 1, 2024.

The refinery is offering OMCs the option to sell HSD at these advance prices, according to sector sources who spoke to The News on Wednesday. Industry insiders noted that the refinery has a large quantity of HSD available and is eager to sell it, even at advance pricing, while the price is set to be revised on October 1, 2024.

Demand for HSD in the country has drastically decreased from 750,000 MT per month to 500,000 MT per month due to various factors, including the influx of smuggled products.The demand for HSD and its imports have become a contentious issue between an oil marketing company (OMC) and refineries, with the latter objecting to OMC imports despite the availability of substantial HSD stocks.

Typically, Pakistan State Oil (PSO) imports HSD under long-term contracts; however, it had to defer its cargo in September this year due to the large stocks of HSD. The diesel imports by another private-sector OMC faced resistance from the refining sector.

Chairperson of the Oil Companies Advisory Council (OCAC) Adil Khattak said that the reduced demand indicates that local refineries are currently meeting about 80 per cent of the country’s HSD needs, with the remaining deficit potentially covered by PSO through a government-to-government (G2G) contract. Therefore, there is no justification for importing additional HSD cargoes into the country.