ISLAMABAD: The Oil Companies Advisory Committee (OCAC) — which represents the companies refining and distributing oil — has accused the regulator of unduly favouring one of its members and causing distortions in the market.

In a letter to the Oil and Gas Regulatory Authority (Ogra), the committee criticised the regulator for permitting one company to import high-speed diesel (HSD).

The decision was “unfounded and irresponsible” as the country already had ample HSD stock, OCAC claimed.

Without naming any entity, the OCAC referred to Gas & Oil Pakistan Ltd (GO), saying it was granted permission to import 15,000 tonnes of additional HSD in June, 15,000 tonnes in July and 40,000 tonnes in August, while further import approvals for 38,000 tonnes had also been granted for September.

Group says one oil marketing company allowed to import HSD despite ample local stocks

According to OCAC’s website, GO is listed as one of the group’s members.

When approached for comment, GO said it would soon respond to the allegations of unfair market practices and dumping of imported diesel in the market without any benefit to end users.

Last year, Saudi Arabia’s Aramco acquired a 40 per cent equity stake in GO for $100 million, marking it the oil giant’s first entry into Pakistan’s fuels retail market.

Excess supplies

The OCAC also informed the media that refineries shut down for maintenance are meticulously planned, with stocks strategically calculated for supplies during the period of closure.

This planning has been thoroughly coordinated with Ogra through multiple meetings, and no credible justification was identified for approving additional HSD imports, especially when the country already holds over 45 days of its stocks.

The committee said that since April 2024, refineries have run out of space to store HSD and are renting additional storage facilities, further increasing their financial burdens.

It added that OGRA holds the ultimate responsibility for granting import approvals, but such decisions should prioritise the integrity of the supply chain.

The body claimed that one HSD cargo that arrived on August 30, 2024, was yet to be unloaded.

The excess imports are resulting in “unfair market practices,” including substantial discounting without any consumer benefit.

According to OCAC, prioritising “unnecessary imports” over refinery upliftment exerts undue pressure on foreign exchange reserves, especially given the current economic challenges.

It added that the oil industry has expressed “deep concern and dissatisfaction” with the current situation, which fosters “unfair competition and negatively impacts the industry”.

According to OCAC, the average monthly HSD sale in the fiscal year 2023-24 was 520,000 tonnes, and they have consistently declined since then due to low economic activity and smuggling of Iranian diesel.

Since there was no significant increase in HSD demand outside the agricultural season, there was no need for additional imports beyond the fuel supplied by PSO.

The existing refineries are already capable of meeting the country’s dem­and of 400,000 tonnes of HSD per month.

The OCAC has reiterated that the smuggling of Iranian diesel has already “undermined the local demand” and the rationale for further imports was “weak and detrimental to local refineries”.

Published in Dawn, September 1st, 2024