KARACHI, Jan 21: A one billion dollar investment is needed to construct strategic reserves for petroleum and petroleum products in the country which could cost petrol consumers an additional rupee surcharge on every litre.
“You have to differentiate between the commercial reserves and the strategic reserves,” Tariq Kirmani, the Managing Director of Pakistan State Oil (PSO) told a group of journalists on Tuesday at his office. He suggested to the government to discuss this issue with all the stakeholders, from oil marketing companies, ministries of finance, petroleum and defence to all others involved in oil business in one way or the other.
At present the PSO maintains a commercial reserve of 800,000 tons of oil and products and is constructing 60,000 tons of additional storage at a cost of Rs210 million. Total commercial storage capacity for oil in the country at present is 1.2 million tons.
Oil marketing companies can take up construction of commercial storages but are not in a position to make investment for construction of strategic reserves. “This has to be done by the government,” the PSO Chief Executive said adding the cost has to be shared by all the stakeholders.
Pakistan, he said, maintains an oil storage capacity of 21 days, which needs to be improved to meet any eventuality. He said that Japan maintains about 6 months oil storage, US and Korea about four months and India is said to be having 30 to 35 days reserves capacity.
Kirmani said that a three-year agreement for supply of three million tons of diesel every year with Kuwait Petroleum Company (KPC) has almost been finalized.
He said that Pakistan now gets fuel oil from four suppliers instead of one as was the case about three years ago.
Kirmani does not foresee much of an oil supply and oil price problem for Pakistan in the event of an outbreak of US-Iraq war. He believes that if at all there would be some eruption it is expected to remain a very localised affair confined to geographical boundaries of Iraq.
“There may be 10 to 15 per cent rise in oil prices for a week or two after the outbreak of a localised fight,” he indicated and expect that prices are bound to remain stable.
Responding to a question, Kirmani said that total consumption of petroleum products in last six months has exceeded 8 million tons which is 2.6 per cent more than what was consumed during July-December 2001.
This increase in petroleum products consumption has come for the first time in last two years and reflect a revival of industry and upswing in the overall national economy.
White oil consumption has touched almost 5 million tons figure during July-December 2002 period showing an increase of 7.5 per cent over the corresponding period last year.
Consumption of diesel went up to more than 3.5 million tons showing a rise of 6.8 per cent. It reflects a quantum jump demand from the industry and transport sectors. Motor gasoline consumption increased by 0.8 per cent.
Black oil comprising mainly fuel oil showed a 4.3 per cent decline in consumption indicating a reduction in demand from the private power operators.
Kirmani said that the PSO was in a fine shape in all respects and ready for privatization.
On issue of circular debt with refineries and electric utilities he said that PSO has to receive Rs13 billion and has to pay Rs11 billion. This reflects the accumulated interest for last several years, which is not being shown in the books of accounts.
“The government will have to resolve this issue,” he replied when asked how was it being tackled. He said that PSO was in negotiation with Wapda on all the issues.