Diesel demand rebounds as crackdown cuts smuggled Iranian fuel

KARACHI: The demand for high-speed diesel (HSD) has increased almost 44 percent after a crackdown on smuggled diesel from Iran, industry officials said on Saturday.

"HSD demand from the legal channel has jumped to 20,000-22,000 tonnes per day from 14,000-15,000 tonnes per day a few weeks ago," an oil sector official told The News.

On the other hand, people engaged in the sale of Iranian diesel in the Hub district of Balochistan and Karachi also confirmed that the supply of Iranian diesel has not remained smooth for the last many days, and now the sale units of Iranian diesel in these areas have almost dried up because of the very low supply.

The interruption in the supply of Iranian diesel also resulted in a surge in its price, as the Iranian diesel is being sold at Rs270 per litre in Hub and its adjacent areas, and at Rs274 per litre in various pockets of Karachi. "The difference has narrowed, as Pakistani diesel is available at Rs282 per litre," the sector people said.

They said that although Iranian smuggled diesel is still being supplied, its quantity is very low because of strict measures taken against it in the last many days.

The Ministry of Energy had asked the Ministry of Interior and the Federal Board of Revenue to crack down on the rampant smuggling of Iranian petroleum products, which forced one refinery to shut down a unit and also threatens refinery upgrade agreements worth billions of dollars.

In a letter, the Petroleum Division of the Ministry of Energy requested the Ministry of Interior and the FBR to take appropriate action to address the issue, which has severely impacted the refinery sector and the entire oil supply chain.

The request was made after the Oil Companies Advisory Council (OCAC) wrote a letter to the Special Investment Facilitation Council (SIFC) about the rampant smuggling of petroleum products two weeks ago.

The smuggled petroleum products dented their sales from the formal sector, as the refineries complained about the low offtake of diesel and its sale by oil marketing companies (OMCs).

The oil sale data released by the oil sector indicated that sales were down by six percent in the first ten months of this financial year, and smuggling of petroleum products was the main reason for this drop in sales.

The months of March and April usually see a surge in the demand for HSD because of the harvesting season; however, its demand remained depressed due to Iranian diesel.