Ogra approves HSD imports amid refinery concerns over excess supply

KARACHI: The Oil and Gas Regulatory Authority (Ogra) has approved the import of 76,000 metric tonnes of high-speed diesel (HSD) by Gas & Oil Pakistan Ltd (GO) and 190,000 metric tonnes by Pakistan State Oil (PSO) for November 2024.

This decision, however, has been met with opposition from the refining sector, which deems the import unnecessary given the country’s sufficient HSD stock levels.Ogra made this decision during the product review meeting (PRM) held on October 22, 2024, sparking criticism from the refining sector, particularly regarding the allowance for GO to import HSD when there is already enough stock in the country.

According to information provided to The News by Ogra, HSD sales in October 2024 increased by 21 per cent compared to projections due to government anti-smuggling efforts and the commencement of the agricultural season. “The high sales have reduced HSD stockpiles to only 19 days’ supply, according to the latest sales and stock reports,” the regulator stated.

The PRM, which was attended by CEOs/MDs from the oil industry and representatives from the Ministry of Petroleum, decided to allocate 190,000 metric tonnes to PSO and 76,000 metric tons to GO, in addition to all locally produced HSD, to meet the country’s consumption needs for November.

However, the refining sector contested Ogra’s decision, arguing that PSO’s imports alone would be sufficient to meet local demand, as refineries are already producing adequate HSD. While PSO is obligated to import under its long-term contract with Kuwait Petroleum Corporation (KPC), the additional import approval for GO lacks justification, according to refinery officials. They also noted that the Special Investment Facilitation Council (SIFC) had directed Ogra to prioritise local refineries before approving any imports.

In a letter to Ogra, National Refinery Limited (NRL) opposed the decision to allow additional HSD imports beyond PSO’s 190,000 metric tonnes. NRL argued that daily sales of HSD, averaging 17,000 metric tonnes during the second half of October, would likely be impacted by falling prices. NRL estimated total HSD demand for November at 510,000 metric tonnes, with 350,000 metric tonnes being supplied by local refineries, leaving a shortfall of 160,000 metric tonnes that could easily be met by PSO’s imports alone.

Attock Refinery Limited also submitted a letter to Ogra, echoing the SIFC’s directive and supporting PSO’s ability to meet the HSD import requirements, without the need for additional imports by other oil marketing companies (OMCs).

In response, GO officials defended Ogra’s decision, stating that the import allocation was made after thorough consideration. GO Chief Executive Khalid Riaz explained, “It is a normal procedure to meet any deficit in petroleum products after refinery production through imports. During the meeting, import allocations were given to PSO and GO, with offers extended to other OMCs, which declined to import.”