Ogra holds six OMCs responsible for petroleum shortage

Updated 12 Jun 2020

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Imposes cumulative fine of Rs40m for violating licence conditions. — Reuters/File
Imposes cumulative fine of Rs40m for violating licence conditions. — Reuters/File

ISLAMABAD: The Oil and Gas Regulatory Authority (Ogra) on Thursday held six major oil marketing companies (OMCs) responsible for petroleum shortage across the country and imposed on them a cumulative fine of Rs40 million.

The authority also issued fresh show-cause notices to Askar Petroleum, Byco Petroleum and BE Energy for similar violations of rules and licence conditions, resulting in petroleum shortage.

Under six separate notifications, Ogra disposed of the proceedings under show-cause notices issued to these OMCs after finding their point of view unsustainable. It held that the companies were found in violation of the licence conditions and they had insufficient stocks.

As such, the regulator imposed a fine of Rs10m each on Shell Pakistan and Total Parco Pakistan Limited (TPPL). Interestingly, Petroleum Sec­retary Asad Hayauddin is the chairman and director of the TPPL board. The regulator also imposed Rs5m fine each on Puma Energy, Gas and Oil Pakistan and Hascol Petroleum.

An official said the responsibility also lied on the petroleum division, particularly additional secretary policy, director general oil and the relevant wing of Ogra for not being vigilant over the emerging shortages.

Imposes cumulative fine of Rs40m for violating licence conditions

The OMCs are required to deposit the fine within 30 days and can seek review of the Ogra orders after payment of 50pc fine also within 30 days. The companies have also been asked to improve the supplies to their outlets immediately otherwise further fine could be imposed on continued contravention of the rules.

The regulator found that OMCs under the Pakistan Oil (Refining, Blending, Transportation, Storage and Marketing) Rules, 2016 and Ogra Ordinance, 2002, were obligated not to abandon any regulated activity, as a part or whole, resulting into discontinuation of supply of petroleum products or its sale in any area without the prior written consent of the regulator.

Rule 69 of the Pakistan Oil (Refining, Blending Transportation, Storage and Marketing) Rules, 2016, empowers the regulator to impose a fine on its licensees on contravention of Rules and Ogra’s directives and decisions.

In addition, in light of the directions of the Ministry of Energy, issued from time to time, the companies were repeatedly directed by the regulator to ensure availability of products at retail outlets to avoid any discontinuation of supplies in the country. However, the companies reportedly abandoned the regulated activity of marketing by either discontinuation of supplies or provision of insufficient supplies at their retail outlets which also caused serious inconvenience and unrest in the masses.

Based on its show cause notice, response received and hearing held, Ogra blamed these companies for serious petrol shortage in the country. The regulator in exercise of the power conferred under Rule 69 of the Pakistan Oil (Refining, Blending, Transportation, Storage and Marketing) Rules, 2016, and under Section 6(2)(p) of the Ogra Ordinance imposed penalties on breach of Rule 53(x) of the said Rules.

Meanwhile, Shell Pakistan said the petrol shortage in the country was due to unprecedented increase in demand during May which even the energy ministry could not foresee. He said the 20-day storage was currently limited to Karachi and could be extended to Punjab and Khyber Pakhtunkhwa by the end of this year after the pipeline was completed.

Speaking to media through a video conference on Thursday, Habib Haider, manager external communications of Shell Pakistan, said that petrol demand more than doubled last month compared to the sales in March, and nobody including the refineries, ministry, Ogra or the oil companies could understand it.

He downplayed the show-cause notice against oil companies alleging that hoarding by the companies and petrol stations caused the current petrol shortage.

“When the prices are going down there is no sense to hold the stocks, actually people would dump off the costly stocks as fast as they could to cut losses,” Mr Haider said, adding that the energy ministry had restricted all imports for April and directed all the oil companies to lift oil from the local refineries, but the refineries too were not prepared for the massive increase in demand in May.

Published in Dawn, June 12th, 2020