‘Emerging OMCs responsible for petrol crisis’

KARACHI: Emerging oil marketing companies (OMCs) contributed the most to the frequent petrol shortages in recent months, with local refineries unwilling to supply them petroleum products because of their non-commercial approach, The News learnt on Friday.

Emerging OMCs or the smaller ones in the oil sector are not financially strong to keep the stock of petroleum products especially petrol and diesel as per the regulatory requirements and their stock often goes dry, official sources in the oil sector revealed.

The country has more than fifty OMCs, but 90 to 95 percent stock of petroleum products is held by four big OMCs. Limited capabilities meant that emerging OMCs did not keep the required 20-day inventories with some stocking only two to three days’ worth of the fuel, while others having none. Some emerging OMCs take the products from bigger companies for supply to their fuel filling stations in the country.

Sources said that these emerging OMCs asked the Oil and Gas Regulatory Authority (OGRA) and Petroleum Division to direct refineries to supply them the petroleum products and a meeting was held on Thursday on this issue.

However, representatives of refineries did not show any interest to accommodate them. OGRA cannot intervene either as refineries and OMCs have commercial arrangements in which the government cannot intervene.

Calling their business model unsound, it was disclosed that these emerging OMCs were not good customers as when prices were expected to rise, they rushed to get supplies from refineries to make windfall profits, but stayed away when prices were expected to go down.

They noted that big OMCs make profits as well as bear the losses, especially when they have to incur the losses on exchange rate adjustments.

The oil industry source said that the actual fault lies with OGRA, which issued dozens of licenses for OMCs without a proper monitoring mechanism to check whether these companies maintained the required stocks as per law or not.

They said that India, which was five to six times bigger than Pakistan in terms of population, has only five to six OMCs.

They said that the issuance of so many licenses would not ensure energy security in the country and rather often created problems in supply chain of petroleum products, especially when prices went up in the international market.

Since these OMCs do not import, they rely on the bigger companies to run their filling stations. The recent crisis was a glaring example of the problems within these emerging OMCS, sources added.