Attock Refinery faces shutdown as OMCs shun local products

ISLAMABAD: Attock Refinery Limited (ARL), which supplies fuel to the northern parts of the country, is losing Rs700 million per month since August this year and may have to shut down its operations if oil marketing companies (OMCs) continue to prefer imported products over local ones, the refinery said in a letter to the government.

ARL, which refines indigenous crude oil, said it was facing serious challenges in disposing of its petrol and diesel production due to poor upliftment by OMCs, who were preferably selling imported products to earn more profits from inland freight equalization margin (IFEM) charges.

If the situation continues for more days then Attock Refinery Limited will have no option but to shut down its operation because of the increasing stocks of the said products.

The letter, dated Dec. 7 and seen by The News, was addressed to Energy Minister Muhammad Ali and the chairman of the Oil and Gas Regulatory Authority (OGRA), Masroor Khan, and asked for urgent action against the “unscrupulous” OMCs.

The letter also mentions that under 35(g) of Pakistan Oil (Refinery, Blending, Transpiration, Storage and Marketing) Rules, 2016, local refinery production must take priority over imports.

The same rule also stresses that it is OGRA’s responsibility to ensure that OMCs prioritize upliftment from local refineries over imports but despite the number of submissions and reminders, OGRA has failed to take any tangible corrective action.

“Yes, ARL is suffering a loss of about Rs 700 million per month mainly due to a delay in allocation of 5000 barrels per day of condensate crude oil from Southern fields and poor upliftment of products by OMCs.

Additionally, ARL's higher throughput would save precious foreign exchange by reducing the import of petrol and diesel, Mr Adil Khattak, Managing Director of the refinery confirmed to The News.

As per the contents of the letters to the Energy Minister and chairman OGRA, ARL is constantly facing serious challenges in the disposal of its MS (Motor Spirit) and High-Speed Diesel) production due to the less upliftment by OMCs.

The letter to the Energy Minister also mentions that ARL has been requesting the petroleum division to allocate 5000 barrels per day of condensate crude oil from fields in Sindh which is currently being exported, but the proposal is yet to be implemented despite its approval by ECC six months ago.

In the letter, OCAC’s data has been attached showing the gap between the offered quality of MS and HSD and quantity lifted by OMCs during the August-November period, 2023 which clearly shows that OMCs are involved in defaulting from their responsibilities to off-take the stock as per rules. OCAC’s data also indicates that the products from other sources were moved by OMCs in ARL-fed areas impacting the country’s consumers through higher IFEM charges and ARL products were not prioritized. Resultantly, ARL was forced to operate at lower throughput due to high stocks creating serious planning and operational issues.

Even for the current month of December 2023, the uplifting situation is not encouraging and ARL would again be shutting down its units to manage high stocks and HSD, which would be most unfortunate.

The sales figures of the last four months show that only 38 percent of petrol and 47 percent of diesel sold by OMCs from ARL’s stock and the rest was brought in from imported sources causing not only foreign exchanges but also higher IFEM which is added up in the consumers' sales prices.