ISLAMABAD, Oct 13: Pakistan has decided to increase its strategic oil reserves to cover up from 21 to 60 days of consumption to ward off security, commercial and economic concerns in case of unforeseen supply disruptions, it is learnt.

The government has, however, not yet made up its mind how it would increase strategic crude oil and petroleum products’ stocks, a senior official said.

He said that a number of issues had emerged during initial discussions over the subject among the stakeholders, ranging from imposition of a tax to generate funds for the storage capacity and the stockpile build-up, operations of these stocks, whether the stocks be maintained by oil companies or by the government or by a new strategic stocks entity and how the entire operation be regulated.

As a result, the government has sought the World Bank’s assistance to engage a professional consultant to conduct a comprehensive study on the subject and analyse from all aspects the cost-benefit-ratio of raising stocks level to 45 days or 60 days. He said the Bank has prepared terms of reference of the study.

He said the total storage capacity of all the installations and depots in the country amounted to only 21 days of consumption equivalent, which are insufficient during a supply crisis. The stocks would be available for use both in terms of price and supply interventions besides meeting the security needs in case of difficult situations.

The objective of the study is to develop an overall framework for the development of strategic stocks for crude oil and petroleum products, consistent with the official security considerations and international best practices. This will cover technical, commercial, financial, institutional, legal and regulatory aspects of developing strategic stocks and would involve issues like logistics, contingency planning and evaluation of alternative options in the refining sector and petroleum market.

The consultant would be required to adopt crude oil and products demand and supply projections for the medium term to long term (5-15 years) in consultation with the petroleum ministry, the oil industry and provide sensitivity of supply and demand projections.

The official said the need for strategic reserve enhancement has also become more important owing to a planned privatization of Pakistan State Oil (PSO), and hence a new pure professional spreadsheet would be prepared to augment product flows through port jetty, major storages, cross-country pipelines, rail wagons, road tanker fleet and distribution depots and compute product wise costs and construction programme for new storages.

Likewise, an overall framework would be developed for petro-product strategic stock, separate from commercial stocks to be maintained by OMCs to ensure how these stocks would be recycled or refreshed and how the risks and rewards could be shared by the oil companies.

It would be consultant s job to propose appropriate options for charging the levy on account of storage stocks, preferred ownership structure of the entity for strategic stocks and its monitoring by the government or Ogra and how to deal with inventory gains and losses.