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OMCs warned of action for failure to furnish storage data

Business

May 30, 2020

KARACHI: Oil and Gas Regulatory Authority (Ogra) on Friday warned oil marketing companies (OMCs) of legal action if they couldn’t turn up monthly sales and stock data of motor gasoline and diesel for the past three months as it accelerated drive to confirm sufficient availability of oil in the country.

Ogra advised OMCs to ensure sufficient supply of petroleum products at their retail outlets.

“You (OMCs) are hereby advised to strictly comply with Ogra’s earlier directives to ensure sufficient supply of petroleum products at your outlets,” said an Ogra’s letter to chief executive officers of OMCs.

“You are directed to provide depot-wise sales and stocks data in respect of motor gasoline and high speed diesel for the past three months (March, April, May, 2020) by 5:00 pm on June 1,” it said.

The letter, available with The News, further said legal action would be initiated in case of failure to provide the above information / confirmation within the stipulated time.

OMCs, under the licence terms granted by the Ogra, are required to communicate their 3-month demand to the petroleum division of the ministry of energy (petroleum division) during a product review meetings where production of local refineries is considered and any deficit is allowed to be imported.

The latest direction to 33 oil marketing companies followed an Ogra’s order to the Hydrocarbon Development Institute of Pakistan (HDIP) to verify petroleum products’ availability at depots of oil marketing companies, retail outlets and refineries storages.

“HDIP is hereby requested to physically check and confirm the availability of motor spirit and high speed diesel with all OMCs depots, retail outlets and refineries storages,” Ogra said in a separate letter to Director General HDIP. “The retail outlets across the country (should) be randomly inspected to ensure that sufficient product is available and shortage, if any, observed (should) be reported to Ogra.”

HDIP was directed to initiate inspections on urgent basis and report to Ogra office latest by June 3, 2020.

In March, the ministry of petroleum stopped oil marketing companies to import oil due to lockdown. “The ministry did not lift this embargo in time for imports for April and May and approvals were issued for limited quantity,” a source said, predicting shortage in May and June.

However, later the ministry import of diesel considering a robust demand forecast from OMCs, citing the price decrease, non-availability of smuggled diesel due to lockdown and the onset of the harvesting season as reasons. Import permissions should not have been cancelled at the first place, according to the industry officials.

The government imposed an abrupt ban on imports as demand fell sharply due to the COVID-19 lockdown in March and there was a fear of refinery shutdowns due to the glut.

Industry officials then said the cancellation of imports after initial approval wreaked havoc with the supply chain planning, profitability and international reputation of OMCs vis-à-vis their suppliers as heavy demurrage costs were incurred due to vessels awaiting import permissions.

Sources said refineries usually provide their surplus products to other OMCs in lean periods, while in peak periods this is diverted back to their own OMCs. As a result, OMCs not backed by refineries bear the brunt of these diversions and scramble for imports, taking price and foreign exchange risks.