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June 4, 2021

Companies warn of potential POL dry out

File photo

ISLAMABAD: The Oil Companies Advisory Council (OCAC) has rung alarm bells telling the government that the depleted condition of KPT oil piers can disrupt the import supply chain of petroleum products, especially Crude Oil and Mogas (petrol) resulting in potential dry out in the country.

In a letter sent on May 25, 2021, to Federal Energy Minister Hammad Azhar and Petroleum Division Secretary Dr Arshad Mehmood, a copy of which is exclusively available to The News, OCAC on behalf of Downstream Petroleum Companies (Refineries and Oil Marketing Companies) sought the immediate intervention of the energy ministry asking to take up these issues with the Maritime Affair ministry for urgent resolution and action against the KPT management which had failed to maintain its all three oil piers.

When contacted, the petroleum secretary confirmed the development, saying that the petroleum division has received letters from OCAC about KPT’s depleted oil piers and new condition of indemnity bond for berthing oil vessels at oil pier-1 at KPT. He said Byco refinery has also sent its proposal to offset the situation through the Single Point Mooring facility.

“Our oil directorate is examining the situation and next week we are going to hold a meeting of stakeholders on this subject.”

However, the OCAC letter goes on to say that interestingly KPT instead of maintaining oil piers in an operational and safe working condition is shifting the responsibility to importers, agents and ship owners by asking for an indemnity bond for unforeseen events.

The OCAC argues that preventive maintenance of all the oil piers while ensuring its operational availability is the sole responsibility of the KPT. However, in this instance, it is surprising to note that the KPT instead of maintaining oil piers in an operational and safe working condition is shifting the responsibility to importers, agents and ship owners by asking for an indemnity bond for unforeseen events.

The letter also threatens that the requirement of the indemnity bond from KPT would have a far reaching negative impact on the ‘International Shipping Market’ with limited availability and increased freights while arranging vessels for delivery in Pakistan. “Contrary to this request, the KPT should be providing assurances for a safe berthing operation and indemnify all importers and vessel owners in case of any untoward happening due to the depleted condition of oil piers.”

According to the letter, the OP1 (Oil Pier-1) is in a deteriorated condition which is being used for berthing in the daylight only and has been in and out of service every now and then.

The Oil Pier 3 (OP-3) is out of operation since July 2018 so its commissioning after necessary repairs needs to be expedited on an urgent basis so as to avoid queuing up of vessels and associated demurrage costs in the shape of forex loss.

The OCAC also mentions the significance of full operational oil piers (all three) saying that they are vital for the strategic energy security of the country. It says that it has also written a series of letters highlighting port constraints at the KPT for early resolution, but to no avail.

The issue came to light when the KPT on May 21, 2021, had written a letter to stakeholders informing that all agents would have to submit indemnity bonds before berthing their vessels at the Oil Pier-1.

The KPT letter, a copy also available to the scribe, says: “During the year 2010 OP-1 should have been demolished due to expiry of its useful life but kept operational to avoid fuel shortage in the country. The same is done in the longer interest of the country. However, despite of carrying out such a risky shipping operation at OP-1, the KPT is facing complaints and criticism for making OP-1 operational due to its depicted condition. Therefore, all agents are informed that the indemnity bond may be submitted for berthing of their vessels at the OP-1.”

However, keeping in view the congestion at oil piers at Karachi Port and Bin Qasim, the BYCO Refinery management came up with an offer to wriggle the country out of expected POL crisis, saying that the supply chain infrastructure of the country for POL can be significantly expanded by connecting Byco’s Single Point Mooring (SPM) facility with the White Oil Pipeline via Asia Petroleum Limited (APL) pipeline. This objective can be achieved with a nominal capital expenditure and in a short span of time.

The offer came in through a letter written on May 26, 2021 to the petroleum secretary from Byco Petroleum Pakistan Limited mentioning that Byco’s SPM (Single Point Mooring) is an offshore jetty installed 12 km in the deep sea where from it receives crude oil directly into the refinery through a subsea pipeline. APL’s 84-km long pipeline is laid between Zulfiqarabad Oil Terminal (ZOT) near PQA and Hub Power Plant (adjacent to Byco refinery). This pipeline is currently running idle due to Hub Power not being utilized much lately. The distance to connect both facilities (SPM and APL) is barely 500 meters.