Defaulting oil firms threaten diesel supply

KARACHI: A large number of country’s oil marketing companies (OMCs) have defaulted on their import commitments especially that of high-speed diesel (HSD), resulting in a shortfall of its import around 205,000 MT from January to March this year, posing a serious threat to its availability in the coming weeks, The News learnt on Sunday.

“In pre and post-Ukraine conflict situation, many OMCs have been persistently defaulting on their import commitment especially of HSD despite their discussions with top government officials”, a letter of state-owned OMC Pakistan State Oil (PSO) responded after it was asked to import petroleum products for other OMCs. PSO, which refused to import the petroleum products for other OMCs due to its squeezed financial condition in view of high global oil prices, disclosed that because of this default the day’s cover situation of these OMCs in particular and the country in general, has deteriorated by around five days at a time when high demand of HSD is expected because of the fast-approaching harvesting season.

The break-up of default of OMCs, given by PSO in its letter to Petroleum Division shows that Total Parco Pakistan Limited (TPPL) didn’t import even a single metric ton of HSD in January against its quota of 25,000 MT but imported 25,105 MT against 30,000 quota in February and also didn’t import anything so far in March against its 40,000 MT quota. March imports included arriving and booked cargoes. The Gas & Oil (GO) Pakistan Limited also defaulted in its import commitment as it imported its full quota of 46,000 MT of HSD in January, however imported 9,770 MT in February against a commitment of 45,000 MT and 25000 MT in March against a commitment of 45,000 MT. Similarly, Hascol Petroleum Limited (HSL) also defaulted its import commitment as it imported 9,500 MT against a commitment of 10,000 MT and didn’t import a single MT against a commitment of 10,000 MT and 8000 MT for February and March respectively. Be Energy also defaulted against its commitments by importing 2,500 MT against a commitment of 10,000 in January and 5,225 MT in February against 10,000 each for the two months and has not imported anything so far in March against a commitment of 20,000 MT

The same goes for Al-Noor Petroleum Limited which imported nothing against the commitment of 3,000 MT in January. Taj also defaulted on the import of HSD against its commitment by importing 2,650 MT in February against 3,000 MT and 5,000 MT against 8,000 MT. Hi-Tech also didn’t import a single MT against a commitment of 1000 MT each for January and March. Euro also defaulted against the commitment of 2000 MT for January and February by only importing 1000 MT later and didn’t import a single MT so far in March against a commitment of 2,400 MT. OIPPL also didn’t import a single MT against 1,500 MT in January and imported 1,000 MT against a commitment of 1,000 MT in March.

Vital also failed to fulfil the commitment in all three months and didn’t import a single MT against 1500, 1000, 2000 MT commitments in January, February and March respectively. ZMOPL also failed against its commitment of 2100 MT and 3000 MT in February and March 2022. My Petroleum imported 6000 MT against 7000 MT commitment in January, 950 MT against 4000 in February and 4000 MT against 5000 MT in March.

These OMCs, accumulatively imported 1500 MT HSD against a commitment of 114,500 MT in January, showing a deficit of 43,000 MT. in February they imported 44,700 MT HSD against 107,100 MT commitment, reflecting 62,400 deficit and imported 35,000 MT HSD against 135,400 MT in March, showing a deficit of 100,400 MT.

Refusing to import HSD for OMCs, PSO believed that there may be several occasions when smaller OMCs take the opportunity by importing and selling according to the price regime and earn windfall profits. A recent example of windfall profits being earned by almost all OMCs other than P50 through huge custom duty waivers on Chinese FTA MOGAS cargoes since the last one and a half years, wherein only PSO was being singled out and not provided a level playing field. “Till date, no action has been taken on this matter also”, it noted.

The letter said that all OMCs are responsible to meet their licensing obligations while OGRA's role is the enforcement of licensing conditions irrespective of commercial considerations for smaller OMCs. Moreover, the PSO already has procured two HSD cargoes through international tendering for March 2022 at C&F premiums of 5.64 and 8.45 USD / BBL as per the market situation to meet the surging demand without comparing it with KPC's premiums.

Hence other OMCs should also act responsibly to procure products as per their commitments, in view of the PR meetings and licensing conditions rather than operating as opportunist traders. In case of certain OMCs are not able to fulfil their obligations, PSO suggested OGRA take necessary action.