ISLAMABAD: The Attock Refinery Limited (ARL) has alerted the government about imminent closure of its plants because of increasing reliance of the oil marketing companies (OMCs) on imports at the expense of foreign exchange reserves and higher prices of petrol and diesel in the market and demanded audit of transportation cost being charged to consumers through product prices.

In its separate letters to Minister for Petroleum Mohammad Ali and Oil and Gas Regulatory Authority (Ogra) Chairman Masroor Khan, ARL chief executive officer Adil Khattak that OMCs had been failing to lift their allocated quotas for petrol and high-speed diesel (HSD) and instead relying on imports. He said it had been happening repeatedly.

He said the ARL — the only refinery in the north — was constantly facing serious challenges over the past few months in disposal of its MS (petrol) and HSD production as OMCs failed to lift their allocated quota. “The situation has once again reached an alarming point where ARL will be forced to shut down if no corrective measures are taken,” he wrote to the minister and the Ogra chief. He said the shutdown would be inevitable “to manage high stocks of MS and HSD, which would be most unfortunate”.

Located in Rawalpindi, ARL processes 100pc of indigenous crude oil from Khyber Pakhtunkhwa and Potohar regions. The poor lifting of product stocks from the refinery could lead to closure of oil fields in the region, thus attracting penalties from the oil producers. On the other hand, this would be requiring even higher imports for a longer period of time at foreign exchange loss and higher transportation cost that ultimately translates into higher product prices for the consumers.

OMCs relying on imports, lifting less than their allocated quota for petrol, diesel, Ogra informed

It said it was increasingly becoming difficult for ARL to operate even at lower throughput of 80pc due to the move by OMCs. The sales figures of last four months show that only 38pc of petrol and 47pc of diesel sold by OMCs in ARL’s sales envelope was lifted from ARL and the rest was brought in from local or imported sources causing not only foreign exchange loss but also higher Inland Freight Equalization Margins (IFEM) which is added up in consumers sales prices.

According to ARL, total petrol sales in ARL-fed areas including KP, GB, AJK and northern parts of Punjab stood at 148,600 tonnes in August against which ARL had offered 63,000 tonnes but only 57,000 tonnes of the fuel was lifted by OMCs. In September, the total sales stood at 114,139 tonnes and ARL offered 54,000 tonnes but OMCs lifted only 43,000 tonnes. In Nove­mber, total sales in the region amou­nted to 117,485 tonnes and ARL offered 71,000 tonnes while OMCs lifted 51,400 tonnes only.

Similar was the situation of HSD.

The letters said data provided by Oil Companies Advisory Council (OCAC) clearly indicated that product from other sources was moved by OMCs in ARL-fed area thus impacting the country inland freight equalization margin (IFEM) and consumers. This also meant that locally produced product from ARL was not prioritised. “Resultantly, ARL was forced to operate at lower throughput due to high stocks creating serious planning and operational issues,” the ARL chief complained, adding that even for the current month of December 2023, the situation was not encouraging and ARL would again be shutting down its units to manage high stocks of MS and HSD.

He pointed out that under Rule 35(g) of the Pakistan Oil (Refining, Blending, Transportation, Storage, and Marketing) Rules 2016, local refinery production must take priority over imports. Therefore, the OMCs should be directed to ensure prioritizing of local product lifting over imports and other sources like smuggling in ARL’s supply envelope so that refinery could operate at optimum throughput.

The ARL also pointed out that the Economic Coordination Committee (ECC) of the cabinet had approved six months ago allocation of 5,000 barrels per day of condensate crude oil from fields in Sindh to ARL, which was currently being exported, but this had not been implemented so far.

The ARL also demand­­ed the federal government’s “intervention to enable ARL to operate at its optimum capacity which would not only save foreign exchange by reducing imports but also stop embezzlement and over charging of IFEM”.

Mr Khattak said the least OGRA could do was to carry out an audit of OMCs supplies in ARL’s supply area to identify defaulting OMCs who are bringing in imported products instead of uplifting products from ARL thus causing not only loss of foreign exchange but also indulging in miss-appropriation of IFEM charges.

He said that due to delay in allocation of 5,000 barrels per day condensate crude oil from southern fields and poor lifting of products by the OMCs, ARL was suffering loss of about Rs700 million per month.

Additionally, ARL’s higher throughput would save precious foreign exchange by reducing import of petrol and diesel, he added.

Published in Dawn, December 9th, 2023