Islamabad: After sugar and wheat crisis, another crisis of oil has reportedly been emerged as three oil marketing companies (OMCs) have exploited oil imports and hoard stocks at their port Qasim terminals to earn hefty profits on account of Petroleum Development Levy (PDL).
A state-run country’s largest oil marketing Pakistan State Oil (PSO) has pointed out an alleged scam by few oil marketing companies (OMCs) for exploiting oil imports to hoard stocks at their port Qasim terminals to earn hefty profits on account of Petroleum Development Levy (PDL).
It is also interesting that PSO was directed to cancel planned imports of diesel and orders for two HSD cargoes of April 2020 on Ministry’s directives. Meanwhile, Petroleum Division allowed the imports of diesel to few companies in last week of April.
It is also interesting to note that Petroleum Division allowed import of diesel on April 24 last month and first delivery of the diesel imports by HPL, Askar and GO arrived in Karachi next on the same day of April 24. HPL imported 21000 metric tons diesel, GO 21000 tons and Akar 4000 tons.The second delivery by these three firms arrived on April 25. HPL imported 17000, GO 21000 and Askar 4000 tons on April 25.
PSO has alleged that HPL and GO are hoarding products and requested the petroleum division to take immediate action and direct these companies to make products available.
In a letter sent to Director General Oil, PSO said that Ministry of Energy (Petroleum Division) not only allowed HSD imports to few OMCs in last week of April 2020 but also berthed their vessels in a prompt manner to keep adequate stocks in White Oil Pipeline (WOP) and up-country. However, these OMCs did not make these cargoes available at up-country rather off-loaded at their Port Qasim terminals despite critical stocks in WOP, seemingly to exploit the expected PDL increase effective May 1, 2020 and earn hefty profits accordingly.
PSO further pointed out that HPL’s 29 days cover being showed is of no purpose as almost all of this product is at Port Qasim and they are effectively dry in WOP and upcountry locations. Due to these critically low stocks of almost all major OMCs excluding PSO, they did not operate their depots effectively and curtailed the supplies on May 1, 2020 despite Ministry’s clear directives vide letter dated April 29, 2020 to operate depots and maintain uninterrupted supplies to the retail outlets.PSO further said that it has been reported that major OMCs hoarded the product at main supply hubs i.e. Mehmoodkot, Faisalabad and Machike.
PSO further said that despite PSO’s timely intimation that few major OMCs are not uplifting products from local refineries and not maintaining adequate days cover of products (particularly HSD) despite high sales trend, the stock levels of these OMCs kept declining throughout the month of April 2020 without any action taken against them and resultantly, the industry is on verge of HSD dry-out in peak harvesting season and considerably high sales trend due to massive price decrease effective May 1, 2020.
It is also on record that despite severe financial issues of PSO due to the circular debt and non-release of funds by the GOP, PSO kept uplifting products from local refineries to maintain adequate stocks level and playing its part to keep the refineries running. However, due to very low upliftment from other OMCs, particularly of Motor Gasoline, PARCO and NRL went on shutdown and other refineries also kept running on very low throughput in the month of April. This has caused limited HSD availability from the refineries. OMC is maintaining a stock of diesel for 17 days, SHELL 6 days, TOTAL 7 days, APL 7 days HPL 29 days, GO 4 days, BYCO 9 days and BE 12 days Cover.
It is also worth-mentioning that PSO planned to maintain an even higher days-cover as of May 1, 2020, which was not able to do because of cancellation of two HSD cargoes of April 2020 on Ministry’s directives. As the days cover based on April 2020 average daily sales, it is also worth-noting that almost all the major OMCs except PSO have days-cover of not more than 2-3 days considering the high expected sales trend in first week of May 2020 which was known to everyone considering massive price decrease and the harvesting season.
It has been reported that major OMCs hoarded the product at main supply hubs i.e. Mehmoodkot, Faisalabad and Machike. On the contrary, PSO operated its depots for more than 20 hours on May 1 despite being the holy month of Ramadan, Labour Day and the COVID-19 risk. Resultantly, a sudden and huge supply load has been transferred to PSO and PSO’s HSD sales on May 1, 2020 was around 34,000 MT which is not in line with our usual average of Approx. 10,000 MT/Day.
Even today till issuance of this letter, PSO has sold 16,000 MT. Given the massive sales on May 1, 2020, limited product availability from local refineries, reluctance from HPL and GO to give product loan to PSO at Mehmood Kot despite commitment at Product Review Meeting forum, PSO will not be able to sustain this huge supply load due to hoarding of product/ low stocks of other major OMCs and resultantly, PSO will also get dried out very soon.
Keeping in view the sensitivity of the matter, MOEPD action is once again requested to try avoiding a national crisis which is already around the corner: 1) Take strict punitive action against OMCs having low stocks level and hoarding the product and direct them to maintain uninterrupted supplies to their retail outlets. 2) Advise HPL and GO to immediately make their imported product available at Mehmoodkot and give a loan of at least 10000 tons each to PSO immediately as per their commitment with MOEPD at PRM. 3) Ensure adequate refinery upliftment of products by all major OMCs according to their market share particularly Mogas so that refineries keep producing HSD volumes to a maximum capacity. 4) Advise Ministry of Finance to immediately release funds to PSO as approved by the GOP enabling us to fulfill our payment obligations against imports as well as local upliftment and open LCs for upcoming cargoes and local upliftment. 5) Do not allow MOGAS vessels berthing to those OMCs which are not uplifting product from refineries as per their market share and stocks position to take financial gains.