OCAC defends refinery standards

KARACHI: The Oil Companies Advisory Council (OCAC) has asserted that Pakistan’s refineries produce diesel in accordance with specifications notified by the Ministry of Energy (Petroleum Division) and have invested substantially to improve fuel standards.

The OCAC strongly refuted a report published on Tuesday in The News, which was based on a letter from the Oil Marketing Association of Pakistan (OMAP), regarding the quality of high-speed diesel.

“The report misrepresents the quality of high-speed diesel (HSD) produced by local refineries and reflects amateurism, as it is devoid of facts. It appears to have been written with vested interests and fails to provide an accurate picture of the local refining sector,” the OCAC said in response to OMAP’s letter.

The council emphasised that local refineries are strategic national assets, playing a crucial role in Pakistan’s energy security and economic development. The suggestion that diesel imports are necessary due to poor local quality was described as misleading. Refineries in Pakistan, it reiterated, produce diesel in line with the specifications notified by the Ministry of Energy (Petroleum Division). Importing a single cargo of HSD costs approximately $45 million in foreign exchange -- an unnecessary burden when adequate local supplies are available.

Over the years, the refineries have invested in upgrade projects, including capacity expansions and the installation of isomerisation and diesel hydro desulphurisation (DHDS) units, enabling them to enhance fuel standards. The council added that Pakistan’s refineries currently produce HSD with sulphur content ranging from Euro I to Euro V. One refinery already produces Euro V-compliant diesel, two supply Euro III, and the remainder produce diesel with a sulphur content of around 5,000 ppm -- far lower than the inaccurately reported figure of 10,000 ppm. Notably, even the refinery producing Euro V diesel faces challenges with product upliftment due to inconsistent offtake by certain companies, resulting in operational difficulties.

The OCAC noted that delays in implementing the Brownfield Refineries Policy 2023 have affected upgrade timelines, a matter already known to the authorities. Once upgrades are completed, all local refineries will supply Euro V fuels.

The council further stated that product pricing remains aligned with specifications, as refineries producing sub-Euro V diesel are subject to a differential cost. This cost is recovered from refineries that do not produce HSD in line with government/import specifications. The recovered amount is incorporated into the Inland Freight Equalisation Margin (IFEM) and passed on to consumers, ensuring there is no additional financial burden on local consumers due to differences in specifications.

The OCAC stressed that refineries operate under regulated licensing conditions, and it is evident to any loyal citizen that local production cannot be fairly compared to imports, as a trade deficit driven by excessive imports harms the economy. The council also pointed out that a significant portion of Pakistan’s transport and agricultural sectors does not require Euro V diesel, making locally produced grades both suitable and efficient for market needs.

Finally, it identified the smuggling of substandard fuel into the market as the real threat to product quality and market stability. The OCAC added that all information is available with Ogra regarding certain companies that have made no local purchases for almost a year and have halted HSD sales from their retail networks.