Port constraints kept the key players of the oil industry on tenterhooks for the past few weeks. They operated under strict government and regulatory instructions to ensure storage remain topped up with petrol and diesel and retail outlets stayed liquid without fail. On the other hand, the fuel stocks at the power stations had to be replenished continuously to make up for LNG and water shortages amid the unusually earlier arrival of summer.

The port authorities, particularly the dedicated-for-oil Fauji Oil Terminal Company (Fotco), the oil industry and the petroleum division agree that oil operations are hampered by various constraints at ports but pass the buck to each other. The oil industry blames Fotco for lack of investment, poor infrastructure facilities and cargo handling. Fotco faults the oil industry and the petroleum division for product testing facilities and not following the given cargo sizes.

All of them agree on efforts to address the bottlenecks and port congestion to cut losses, avoid product shortages and save foreign exchange on account of penalties and demurrages and yet take years to implement the steps they agree upon.

Early this month, the ministries of energy and industries also agreed to examine the berthing of oil vessels and their quality testing at the jetty of Pakistan Steel Mills, currently abandoned for well over seven years, to reduce overall turnaround time and opportunity loss. Last week, the petroleum division’s testing arm — Hydrocarbon Development Institute of Pakistan (HDIP) — and Fotco also agreed to start quality testing and sampling at outer anchorage with effect from Monday to save time.

The oil industry blames Fauji Oil Terminal Company for lack of investment, poor infrastructure facilities and cargo handling while Fotco faults the oil industry and the petroleum division for product testing facilities and not following the given cargo sizes

Oil Companies Advisory Council (OCAC) — an umbrella association of over three dozen industry players — is running from pillar to post to put in place an inter-ministerial oversight arrangement to address already identified challenges and bottlenecks restricting Fotco from providing optimal performance. Fotco also concedes the prevailing port congestion issue at Fotco (Port Qasim) and the constraints being faced in the quick turnaround of oil vessels.

Fotco says it is capable of handling 18-20 ships per month which is in line with national import needs and at the same time blames HDIP for restricting Fotco’s capability to 15 ships per month, which is further reduced to 12-13 ships during monsoon season. It says HDIP causes a 12-15 hours delay to each vessel because of its sampling after the berthing of the ship at the jetty. It also blames the oil industry for restricting Fotco’s handling capacity primarily because of lower vessel pumping and receipt flow rates at storages, excessive sampling activities, non-availability of night navigation and financial hold.

Yet it concedes to have handled only 16 vessels with berth occupancy of 88 per cent and operational utilisation at just 68pc in April against 22 vessels planned by OCAC, with potential opportunity loss of 4-5 vessels. It has asked the government to ask the maritime affairs ministry to facilitate the hiring of additional pilots by Port Qasim Authority (PQA) at the earliest along with night navigation facilities to reduce laycan time from the existing 36-48 hours to 24 hours and below.

It also confirms that the main navigation channel in PQA was not wide enough to allow two-way traffic with LNG movement. Therefore, PQA should expedite the early dredging of the alternate navigation channel of Chara Chan Waddo to increase vessel traffic.

The OCAC on the other hand, questions as ‘overstatement’ the Fotco’s claim of handling volumes of 12 million tonnes per annum and potential capacity of 14m tons per annum. It says the Fotco’s own record suggests its designed capacity is 9m tons per annum, while the actual “achievable” capacity is much lower due to various factors. This year, Fotco has handled approximately 6.6m tonnes from July 2021 till April 2022.

The OCAC says that Fotco’s view about the 8.5m tonnes import requirement was untrue as quite a few cargoes are being shifted to Karachi Port owing to congestion at Fotco. “In fact, Fotco’s handling capacity due to port constraints may not be beyond 8.5m tonnes per annum which is a deterrent to the success of the $132m white oil pipeline multi-grade strategic project and ultimately to the country’s supply chain.”

The main factors affecting efficiency are unavailability of night navigation and channel issues due to which an average of at least 12 hours is wasted from completion of vessel discharge till berthing of the next vessel. This amounts to a loss of around seven to eight days per month and if these issues are resolved, around five more vessels could be berthed each month, enhancing Fotco’s capacity from 15 to 20 vessels.

In the peak period of April 2022, Fotco was able to berth only 16 cargoes against the planned vessels of 24, out of which two vessels were shifted to Karachi Port Trust owing to severe port congestion while the remaining spilled over to the next month.

OCAC believed that cargo sizes could be optimised but again there were some limitations regarding actual draught available as well as PQA’s notice to mariners to allow berthing of vessels having more than 12.5 meters draught only during the high tide.

On top of that, the oil industry also highlights that product contamination, because of a single line for many products, is a critical issue affecting products’ quality in storage tanks, increasing time consumption and the requirement of air/nitrogen pigging. This issue is because Fotco is using a ‘single’ line to handle petrol, high-speed diesel and condensate cargoes

The oil industry has asked Fotco to immediately lay separate lines for each product to avoid contamination issues and save additional time and cost as oil marketing companies were incurring heavy costs for line pigging to Fotco. The industry believes that the target of handling 20 vessels a month cannot be achieved without night navigation, resolution of channel issues and laying of separate pipelines for each product.

Both OCAC and Fotco agree on the urgent need to commence dredging for alternate navigation channels to facilitate the entry and exit of the increasing number of vessels and save considerable time. There is also a general agreement on a joint special committee composed of all relevant stakeholders to devise and implement a strategy for an urgent resolution to Fotco’s challenges given the fact that since the inception of the port in 1995, investments for infrastructure enhancements have not been made despite substantial returns.

Published in Dawn, The Business and Finance Weekly, May 16th, 2022

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