Pakistan has no policy on strategic fuel storage

Minister says existing commercial storages to be used as strategic stocks in war-like situation; Ogra has failed to maintain 21-day mandatory stock

ISLAMABAD: Pakistan, which is in war against terrorism for more than one and half decade, still have no policy on strategic fuel storage placing – a big question mark on safety of country in case of war with any neighbouring country.

This upsetting revelation was made in a thought-provoking presentation of Chief of Oil Companies Advisory Council (OCAC) Illyas Fazal tabled some days back here at a seminar arranged by petroleum Institute of Pakistan (PIP) on oil and gas sector.

A copy of the presentation available with The News says Pakistan is a country wherein even after lapse of 69 years since its emergence, there is still no policy on strategic fuel storages. It clearly mentions that strategic reserves are permanently held for non-commercial reasons which are used to provide safeguard against external blockades in times of war.

The said fuel stocks also provide safeguard against the internal impediments such as flood and disasters. And in case of oil industry disruptions because of refineries’ outages and pipeline breakdowns, the strategic reserves are used in the country. The strategic fuel reserves are separate from the commercial stocks but these can be utilised by oil industry in times of need.

When contacted, Illyas Fazal confirmed that the country has no policy on strategic fuel stocks which should be built under comprehensive plan on war footings basis. And to this effect, a task force should be constituted by the government with an aim to carving out the formula keeping in view the cost of everything involved in building and maintaining the strategic fuel stocks and modus operandi under which the strategic fuel reserves will not only be built but maintained at least for 45 days.

“The task force should comprise armed forces, Ministry of Petroleum and Natural Resources, OCAC and its members, oil marketing companies and refineries.” However, Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi, when contacted, came up with different version, saying that the country has not separate strategic fuel storages across the country, but the existing commercial stocks will become available as strategic stock for the armed forces when there is a war like situation. To a question, the minister said that all oil marketing companies are required to build their stock for 21 days, but Oil and Gas Regularity Authority (OGRA), being the regulator, has miserably failed to get the commercial stock maintained for 21 days as has been mentioned in the licence of OMCs. Currently, under the rules, all the oil marketing companies need to maintain the fuel commercial storages up to 21 days, but they are managing commercial for up to 11-13 days maximum, which is very alarming development given the scenario.

However, Fazal’s presentation mentions that globally the strategic reserves vary as per government policy. The EU member states are required to hold stocks at higher of 90 days of average net daily imports or 61 days of average daily inland consumption in order to mitigate a supply crisis. Germany maintains 90 days through a federal body with refineries, OMCs, government as members.

So much so, Netherlands has 90 days stock that is maintained through an independent non-profit body. And UK has 67.5 days of net consumption where the OMCs manage strategic storage. However, responsibility and ownership for maintaining strategic stocks resides with the governments, with the industry cooperating in the implementation of the policy. In all the International Models, the cost of strategic storage is recovered as a charge or levy passed on to the end-consumer on all inland sales.

However, coming to Pakistan, Fazal said that based on a study conducted some years back, 45 days strategic stock requirement for the country had been proposed by the authorities. “It was also proposed that these storages should be built across the country”

Being the frontline state in war against terrorism, he said, Pakistan badly needs to upgrade oil stocks capacity up to 45 days at least. The forces are already in an intensive fight with deadliest spate of terrorism under the Zarb-e-Azab operation in various pockets of the country, a senior official said while quoting the recommendation of forces.

Ogra in its correspondence has also asked the Ministry of Petroleum and Natural Resources to thrash out a plan for increasing fuel storage capacity of the country. The relevant officials in the ministry also confirmed the development, saying the ministry has started shaping up the plan to increase the country’s fuel storage capacity to 45 days. In the wake of circular debt and inventory losses that are perpetually being incurred because of continuous tumbling of oil prices in the market, oil marketing companies are unable to maintain the existing storage of 21 days.