Oil sector urges Ogra to act as diesel stockpiles hamper refinery operations

KARACHI: The oil sector has urged the Oil and Gas Regulatory Authority (Ogra) to implement an actionable policy to address the mounting stockpile of high-speed diesel (HSD).

The regulator came under fire during a meeting with refineries and oil marketing companies (OMCs) for its handling of the escalating HSD stock issue. The meeting was convened following complaints from refineries about the accumulation of petroleum products -- particularly HSD -- which OMCs have failed to lift, thereby disrupting refinery operations and crude oil processing.

“The meeting remained inconclusive in resolving the matter; however, Ogra faced criticism from both refineries and OMCs for its perceived inaction,” a participant of the meeting told The News.

The local refining sector is struggling with rising HSD stocks, which have not been offloaded. This led Attock Refinery Limited (ARL) to shut down one of its crude distillation units, while other refineries across the country are also operating at reduced capacity.

Refineries also raised concerns over continued HSD imports and rampant smuggling, which have severely impacted the sale of locally produced diesel. The growing inventory has pushed refineries to the brink of ullage constraints, forcing them to curtail production -- an outcome that may increase the country’s dependence on petrol imports.

Participants at the meeting questioned the rationale for importing HSD in recent months, despite sufficient domestic production to meet demand. Pakistan State Oil (PSO), under its long-term contract with Kuwait Petroleum Corporation (KPC), is obligated to import HSD. However, Ogra has also allowed private-sector OMCs to import HSD, which the refining sector believes was unnecessary.

In a bid to mitigate the crisis, refineries recently offered OMCs HSD at discounted forward-pricing rates, anticipating a potential price reduction in the upcoming fortnightly review.According to available data, average daily HSD demand during the first 13 days of April was recorded at 15,400 metric tonnes -- approximately 30 per cent lower than the projected daily average of 21,700 metric tonnes estimated by authorities.

This slump in demand comes at a time when the country is already holding roughly 45 days’ worth of HSD inventory, with additional import cargoes still scheduled for arrival. The continued import of refined HSD, despite surplus stock and no immediate supply concerns, has drastically slowed product offtake by OMCs.

As a result, refinery throughput has been directly affected, subsequently impacting the production of other essential and deficit petroleum products such as petrol, jet fuel and others.