KARACHI: The government has formed a committee to address issues faced by Gas & Oil Pakistan Ltd (GO) regarding high-speed diesel (HSD) import permissions. This matter became contentious when local refineries strongly objected to the import due to the large stocks of HSD already available in the country.
The committee, established by the prime minister, will be led by the deputy prime minister and will include the minister for finance & revenue, the minister for petroleum, the secretary of the Petroleum Division, and the chairperson of the Federal Board of Revenue (FBR).
The committee was formed after GO wrote to the Oil & Gas Regulatory Authority (OGRA), following the cancellation of an HSD cargo scheduled for October. GO requested a reconsideration of this decision due to significant disruptions to its supply chain.
GO expressed concerns about the abrupt cancellation of these imports, stating that OGRA’s mandate includes ensuring a level playing field for all oil marketing companies (OMCs) and preventing anti-competitive practices. While supporting local refineries, it is crucial to balance this with ensuring that OMCs are not disadvantaged by such policies, thereby maintaining a competitive and efficient market that benefits consumers and promotes industry growth.
GO noted that the peak agricultural season in the country will begin in October 2024, and a potential ban on HSD imports could lead to a shortage crisis if such measures are enforced.The company also highlighted that local refineries produce HSD with a minimum flash point of 54 degrees C and a sulphur limit of 10,000 PPM, which falls short of the import specifications requiring a minimum flash point of 66 degrees C and 10 PPM sulphur. This discrepancy affects the quality of the fuel available in the market.
GO further stated that imported Euro V HSD, which is the cleanest fuel available, is mixed with locally produced HSD in the white oil pipeline system. This practice diminishes the environmental benefits of using cleaner fuels.
GO pointed out that local refineries are blending kerosene with HSD to increase production and benefit from government-imposed duties, which impacts the quality of fuel.The company also noted that local refineries are not producing enough jet fuel to meet national demand, leading to significant imports of JP. Adjusting the local HSD flash point specification to 66 degrees C could alleviate this issue.
The refinery sector contends that the flash point of HSD produced by local refineries is 54 degrees C and aligns with the Euro V specification as notified by the Ministry of Energy (Petroleum Division). It is important to highlight that the 66 degrees C flash point for HSD in Pakistan applies only to imported products. The limit of a 60 degrees C or higher flash point is derived from marine oil fuel specifications and differs from automotive, locomotive, and off-road usage, according to the refinery sector’s comments to the government regarding GO’s observations.
Refineries also stated that jet fuel demand in the country is primarily met by local refineries with only occasional minor imports, usually during refinery turnaround periods. Thus, there is no justification for increasing the HSD flash point for local refineries, which already conforms to Euro V specifications.